Gray suffered a critical spine injury after being arrested on April 12, having run away after making eye contact with officers. Officers held him down, handcuffed him and loaded him into a van. While inside, he became irate, and leg cuffs were put on him, police said.
He asked for medical help several times, beginning before he was placed in the van. After a 30-minute ride that included three stops, paramedics were called. He died a week later.
Gray, 25, was black, and the incident led to days of protest and violence in Baltimore and added to calls in the United States to address concerns about police brutality and the treatment of minorities by law enforcement officials.
Last week a judge ordered individual trials for six Baltimore police officers charged in Gray's death.
The settlement announced Tuesday still needs the approval of a board that oversees city spending. It id due to meet Wednesday.
"The proposed settlement agreement going before the Board of Estimates should not be interpreted as a judgment on the guilt or innocence of the officers facing trial," said Baltimore Mayor Stephanie Rawlings-Blake. "This settlement is being proposed solely because it is in the best interest of the city and avoids costly and protracted litigation that would only make it more difficult for our city to heal and potentially cost taxpayers many millions more in damages."
The settlement does not resolve any factual disputes and "expressly does not constitute an admission of liability on the part of the city, its police department or any of the officers," a news release by the city said, adding "the settlement has nothing whatsoever to do with the criminal proceedings."
Detective Donny Moses, a Baltimore Police Department spokesman, said the agency's public affairs staff was under direct orders not to comment on the proposed settlement. "It really is not a Police Department matter," he said, referring questions to the city solicitor's office.
Initial police reports said Gray was arrested with a knife, and whether carrying it was legal is sure to be a central issue in the officers' trials. Prosecutors say it's legal under a city ordinance, while defense attorneys argue that it's a switchblade and thus illegal under city and state law.
All six officers — Caesar Goodson, Garrett Miller, Edward Nero, William Porter, Lt. Brian Rice and Sgt. Alicia White — are charged with second-degree assault, misconduct in office and reckless endangerment. Porter, Rice and White also face manslaughter charges, and Goodson faces the most serious charge, second-degree depraved-heart murder.
Three of the officers are black, and three are white.
Al Jazeera and wire services