The C$445 million (£221 million) fund was held up by Canadian Pacific, one of the companies involved in the incident.
On Friday, the settlement was approved by a judge in the US, where the deal is linked to the bankruptcy filing of another plaintiff.
In 2013, a train carrying 72 oil tankers derailed causing an explosion in downtown Lac Megantic, Quebec.
The settlement ends a lawsuit brought by the victims against two railways - Montreal Maine & Atlantic Railways (MMA) and Canadian Pacific - as well as insurance companies and a dozen other firms.
Canadian Pacific argued that they should not be included in the suit because the derailment involved MMA trains and happened on MMA-owned tracks.
However, the trains originated on Canadian Pacific tracks.
A judge in Quebec had ruled that Canadian Pacific failed to properly classify the highly volatile petrol being carried by the train at the beginning of its journey.
The crash caused an explosion and several fires which levelled the city's downtown, destroying 30 buildings.
Following the disaster the Montreal Maine & Atlantic Railways filed for bankruptcy.
Bankruptcy protection will shield them from further claims. But Canadian Pacific could face more lawsuits and potentially more pay-outs.
A settlement has been reached for victims of an oil train derailment in Canada that killed 47 people.