The Italian actress, 42, settled the notice of intent to sue filed by Jimmy Bennett, who is now 22, for $380,000 (£298,000), the New York Times reports.
The notice was filed by Bennett after Argento accused Hollywood producer Harvey Weinstein of raping her last October.
Argento and Bennett co-starred in a 2004 film called The Heart Is Deceitful Above All Things in which Argento played Bennett’s prostitute mother.
Bennett says in the notice that he had sex with Argento in a California hotel in 2013. The age of consent in California is 18.
The notice says the encounter traumatised Bennett and hurt his career, the Times reported.
The newspaper said it received court documents that included a selfie of Argento and Bennett in bed. Three people familiar with the case said the documents were authentic, the Times reported.
Argento became one of the most well-known activists of the #MeToo movement after she told the New Yorker magazine that Weinstein raped her at the Cannes Film Festival in 1997 when she was 21.
Argento told the magazine that she continued to have a relationship with Weinstein because she was afraid of angering him.
Weinstein has been indicted on sex crime accusations involving three women, but not including Argento. He denies any wrongdoing.
Representatives for Argento have not issued a comment on reports of the settlement.