Raynard Herbert – known as Rae Rae – claims he helped the rapper master the album and settle the distribution agreement for a payment of 1% of the profits.
The producer claims that while he began receiving royalty cheques in 1998, they stopped arriving in November 2008.
He said he contacted Jay-Z’s representatives in May 2010 to chase down the cheques, but failed to receive a response.
He says the 48-year-old rapper, whose real name is Shawn Carter, acted “with malice and in conscious disregard” of his rights and is suing for breach of contract and unjust enrichment.
Mr Herbert is asking for both his alleged owed royalties as well as interest and damages.
Jaz-Z’s record company – Roc-A-Fella Records – which he founded along with “Dame” Dash and Kareem “Biggs” Burke in 1995 – is also named in the suit.
The platinum selling album – which has sold millions of copies worldwide and is frequently ranked as one of the best rap albums of all time – is often viewed as Jay-Z’s best work.
In May the star was in court to defend his clothing brand – Rocawear – during an investigation into whether his line violated security laws.
Jay-Z is currently in the UK with wife Beyonce as part of their On The Run II tour, which kicked off in Cardiff last week.
Some reports suggest ticket sales for the 48-date run have not been good, with many seats left unsold both in Europe and North America.