The lawsuit uncovered evidence that the department had suspended rules limiting the use of force during the protests, had pressed undercover officers to infiltrate protest groups and had sought to provoke protesters and uninvolved bystanders by attacking them with batons and pepper spray.

Under the settlement, the department denies any guilt but agrees to change its police handbook to better protect protesters, adding a requirement that officers report the use of force during a mass demonstration and prohibit arrests without evidence of a crime. Officers assigned to civil disturbance units will be reminded of the changes in a new, mandatory 40-hour training course and annual refresher session.

The Partnership for Civil Justice, a civil liberties advocacy group, and a group of local residents brought the suit five years ago to try to force the police department under Chief Charles H. Ramsey to change what it considered an illegal pattern of treating protesters like suspected criminals. One of the suit's lead attorneys, Mara Verheyden-Hilliard, said yesterday that the group thinks that it achieved much of that goal through painstaking litigation and depositions that revealed the department's behavior and led to the D.C. Council passing legislation last year to reform police handling of protests.

A spokesperson for the D.C. attorney general's office declined to comment yesterday. Ramsey also declined to comment, saying that other lawsuits are pending.

The settlement, which comes as Ramsey is preparing to leave his post, is the latest in a series of payments the city has made stemming from police conduct at demonstrations. In January 2005, the District government agreed to pay $425,000 to seven people caught up in a mass arrest at Pershing Park in September 2002. More than 400 people were rounded up at the downtown park during demonstrations against the World Bank and International Monetary Fund. Several investigations found that Assistant Chief Peter J. Newsham, after conferring with Ramsey, had ordered arrests without warning or evidence of a crime -- including of people who had nothing to do with the protests.

In that Pershing Park settlement, Ramsey was also required to send an apology letter to each of the plaintiffs.

In January 2004, the city agreed to pay $7,000 to $10,000 to each of three Corcoran College of Art students who sued. The students had said that they were photographing the Pershing Park protests and were encouraged by police to enter the park and then arrested in the roundup.

D.C. Council member Kathy Patterson, (D-Ward 3), who successfully pressed for the 2005 legislation to address abuses of protesters' rights, said yesterday that the department was guilty of repeatedly abusing protesters' rights in demonstrations.

"I regret that taxpayers are forced to pay another $685,000 for the wrongdoing by the Metropolitan Police Department," she said. "At the same time, I am glad the District has settled and agreed to the injunctive terms. I'm hopeful that the comprehensive training envisioned in the settlement . . . can prevent wrongful police action in the future."

More than 80 percent of the money will go to legal fees incurred over five years, according to Partnership for Civil Justice. Most of the remainder will go to two people sprayed by pepper spray.

Mike Shinn, a security consulting company owner who joined in the suit settled yesterday, said he was glad that the department would be forced to follow the laws of the country. Shinn, a Bush supporter who went to watch the inaugural celebration, said he felt he was in another country when police pushed him, other spectators and protesters against a wall and an officer hit him on the head from behind with a baton.

"I tried to explain what I was doing and ask him what he wanted me to do, and he hit me again," Shinn recalled. "He said, 'Do you want some more of this?' I was just shocked, just utterly shocked. I thought: What in the world are they teaching them?"

Shinn said he hopes the incoming chief, Cathy L. Lanier, and the departing Ramsey learn a lesson.

"You can't arrest people for just having opinions, as unpopular as they may be," he said. "You don't just arrest everybody on the streets because you think they might have an opinion. It flies in the face of everything that is America."