The Brothers & Sisters star sued Jessica Gibson in April last year, claiming she tried to extort money out of him through blackmail.
Gibson countersued, accusing the actor of groping her and exposing himself.
Now, after months of legal wrangling, the warring sides have decided to drop all legal action, according to People.com.
It is not known if an out-of-court settlement was involved.
However, Lowe is still facing legal action from a second nanny, Laura Boyce, who sued Lowe and his wife Sheryl for wrongful dismissal and unpaid wages after the actor filed suit alleging that the former employee broke a confidentiality agreement.
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