The California tech giant had taken a 28.4 percent stake in Craigslist in 2004.
Craigslist sued eBay after the online auction giant launched its own classified listing in 2007 called Kijiji, alleging that eBay had hidden the rival project at the time of its investment.
"Under a confidential settlement agreement, Craigslist has repurchased all of eBay's equity and all litigation between eBay and Craigslist will be dismissed," according to the eBay statement.
In 2010, a Delaware court restored eBay's holding in Craigslist to 28.4 percent after it had been diluted to 24.9 percent by actions taken by Craigslist majority shareholders Craig Newmark and Jim Buckmaster.