Actor Sacha Baron Cohen and talk show host David Letterman have settled a defamation lawsuit brought against them by a Palestinian grocer, who was portrayed as a terrorist in the film "Bruno".

Ayman Abu Aita was interviewed during the 2009 film, where he was described as a terrorist group leader of the Al-Aqsa Martyrs Brigade, the military wing of the Palestinian Fatah movement.

Court papers described Abu Aita as a Christian peace activist. In the wake of the movie, he received death threats, but said he did not realise that Baron Cohen was an actor filming a comedy.

The suit reportedly sought $115 million in damages that Abu Aita claimed had affected his business.

A report in the Daily Mail said that, according to Abu Aita's lawyer, Joseph Peter Drennan, the case had been settled "to the mutual satisfaction" of everyone involved., but no sum of money has been declared.

The article added that lawyers for Mr Baron Cohen and Mr Letterman "have said in court filings that free speech rights protected the statements about Abu Aita in Bruno and the Late Show interview."