The government will also pay the asylum seekers' legal costs, estimated at $20 million.

Billed by Immigration Minister Peter Dutton as a "prudent outcome", the settlement will avoid a six-month damages trial that would have seen the Commonwealth and its contractors accused of negligence and false imprisonment.

Law firm Slater and Gordon, which brought the class action on behalf of former detainee and lead plaintiff Majid Kamasaee, heralded the "very good and strong" result for the 1905 men, many of whom are still on Manus Island.

"This has been a long battle for social justice," said principal lawyer Andrew Baker. "No amount of money is going to be able to recognise the terrible conditions that these detainees have had to endure."

The settlement is not an admission of wrongdoing from the Australian government, and Mr Dutton said the Commonwealth "strongly refutes and denies the claims made in these proceedings".

He sought to pin the blame back on Labor, which reopened the Manus centre in 2012, arguing the estimated $90 million settlement was another line item on "Labor's border bill".

In question time, Mr Dutton also took aim at "the ambulance-chasing lawyer firm of Slater and Gordon", which has connections to the ALP and unions.

The proceeds will be distributed to asylum seekers based on the length of their detention and their alleged injuries. The average compensation payout stands to be in excess of $35,000 per person.

Mr Baker said he believed the settlement was the largest for a human rights case in Australian history, and thanked the witnesses who came forward including doctors, security guards and detainees.

Mr Kamasaee, a 35-year-old Iranian, tried to reach Australia by boat in 2013 and was interned on Manus Island for 11 months before a medical transfer to Australia.

In a statement read by his lawyers, he said his treatment in Papua New Guinea was "degrading and cruel", with limited access to medical treatment he needed for severe burns he had sustained in Iran as a child.

"I came to Australia seeking peace, but I was sent to Manus, which was hell," he said. "Every day in the harsh sun, my skin felt like it was on fire. I was in pain every minute of every day ... I cried every night until I had nothing left.

"This case is not just about me, it is about everyone who has been trapped on Manus Island. Our voices have never been listened to, but today we are finally being heard."

In a 166-page statement of claim, plaintiffs alleged they were housed in lacklustre facilities that were dirty, overcrowded and overheated, were subject to violent and anti-social behaviour from security staff and other detainees, and routinely had insufficient drinkable water, hygiene products and medications, among many other complaints.

A further claim of false imprisonment was added to the class action last year, in parallel with a separate claim in the PNG Supreme Court. It is now expected the PNG case will be dropped.

Slater and Gordon lawyers will visit Manus Island soon to explain the result to refugees and asylum seekers. Group leader Rory Walsh said the "strong message" they had given him was to accept the money and avoid a lengthy trial.

"We think it is a very good and strong outcome and we think the court will have no hesitation in approving this figure," he said. "When we were offered sufficient money - and we were - we had no hesitation in taking it."

Barrister Greg Barns, a spokesman for the Australian Lawyers Alliance and a consultant on the PNG class action, welcomed the settlement but said it would not have been necessary if Australia had done away with offshore detention.

"Australian taxpayers are paying for the unlawful actions of the Australian government in circumstances where it was completely avoidable," he said.

About 800 of the claimants remain on Manus Island, with many refugees hoping to take advantage of a resettlement deal struck with the US. But a minority who have had their asylum applications knocked back, or who have refused to participate in the assessment process, are now in limbo, with many refusing to return home.

The matter is complicated by the fact the Manus Island RPC is due to close by October 31, after the PNG Supreme Court last year ruled it unconstitutional.

Mr Barns said: "It's great that there's a settlement of this action, but the Australian government should not use this settlement to force people to go back to the countries from which they fled."

Mary Crock, an immigration law specialist at the University of Sydney, said the settlement should end the "legal fiction" that Australia had no responsibility for those sent to Manus Island and Nauru.

That sentiment was echoed by Greens immigration spokesman Nick McKim, who added: "Justice demands that these men now be brought to Australia."

Labor's immigration spokesman Shayne Neumann declined to comment because the settlement had not been finalised.

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