Britain's Foreign Secretary William Hague told the House of Commons that his government was issuing a public statement of regret to the victims for the first time in an out of court settlement.
"The British government recognises that Kenyans were subject to torture and other forms of ill treatment at the hands of the colonial administration. The British government sincerely regrets that these abuses took place, and that they marred Kenya’s progress towards independence. Torture and ill treatment are abhorrent violations of human dignity which we unreservedly condemn," Hague said in London.
Hague however insisted that the British government "continues to deny liability on behalf of the government and British taxpayers today for the actions of the colonial administration in respect of the claims."
Some 5,228 Kenyans who were tortured during the Mau Mau uprising against colonial rule in the 1950s will share out the money that the British government will pay out.
If the money is divided equally, each of the Mau Mau veterans should get Sh500,121. However, the most each of them is likely to receive is Sh347,000 as the rest will go towards paying the legal fees of their lawyers- Leigh Day.
Hague also a monument would also be put up in Kenya in remembrance of those who lost their lives during the Mau Mau period.
The news was welcomed in Nairobi by some 160 Mau Mau veteran who were addressed by the British High Commissioner to Kenya Christian Turner.
Mau Mau Association Secretary General and veteran Gitu wa Kahengeri said that the Mau Mau veterans who had filed the case agreed to the settlement.
"We accepted the offer made by the British Government. No amount of money can ever be enough to compensate us for what we went through. My father and I were jailed for seven years. This is not about money. The fact that the British Government has apologized and acknowledged what it put us through, that itself is enough," said Kahengeri.
Kahengeri said that he hoped that this would be the first step towards reconciliation between the Mau Mau and the British Government.
During the Emergency Period widespread violence was committed by both sides, and most of the victims were Kenyan. Many thousands of Mau Mau members were killed, while the Mau Mau themselves were responsible for the deaths of over 2,000 people including 200 casualties among the British regiments and police.
Hague told his Parliament that the settlement was part of a process of reconciliation with Kenya celebrating 50 years since it gained independence from the British.
"We do not want our current and future relations with Kenya to be overshadowed by the past. Today we are bound together by commercial, security and personal links that benefit both our countries. We are working together closely to build a more stable region. Bilateral trade between the UK and Kenya amounts to £1 billion each year, and around 200,000 Britons visit Kenya annually," Hague said.
Last year, Paulo Muoka Nzili, Wambugu Wa Nyingi and Jane Muthoni Mara told the High Court in London how they were subjected to torture and sexual mutilation.
Lawyers said that Nzili was castrated, Nyingi severely beaten and Mara subjected to appalling sexual abuse in detention camps during the Mau Mau rebellion.
A fourth claimant, Susan Ngondi, died before the legal proceedings began.