The payment is understood to include the 拢500,000 damages the Daily Star paid to Archer when he successfully sued the paper for libel after it published a story claiming he slept with prostitute Monica Coghlan while he was vice-chairman of the Conservative Party.
Archer is also believed to have paid around 拢1m in legal fees to the paper, which is owned by Express Newspapers.
The Daily Star served a writ against Archer after he was jailed for lying in court over his affair with Coghlan. The newspaper had been seeking as much as 拢3.6m in damages.
He was found guilty of perjury following revelations by Archer's former friend Ted Franc published in the News of the World, which said that he provided a false alibi for Archer at the trial in 1987.
The payout comes on the heels of a 拢360,000 payment to the News of the World, from which Archer won 拢50,000 damages over the same scandal.
Archer is in prison in Lincoln, serving a four-year term for perverting the course of justice on two counts and two counts of perjury.
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