An estimated 20,000 indigenous children taken from their families starting in the 1960s and placed for adoption or fostering will share in a Can$800 million (US$640 million) payout, the government announced Friday.
The so-called "Sixties Scoop" saw them placed with primarily white middle-class families in Canada, the United States and overseas.
In recent years, as the children grew into adults and became aware of their past, several lawsuits and class actions were filed over their loss of aboriginal identity, claiming in court documents that it resulted in psychiatric disorders, substance abuse, unemployment, violence and suicides.
"People affected by the '60s Scoop have told us that the loss of their culture and language are among the worst kinds of harm that they suffered," Indigenous Relations Minister Carolyn Bennett told a press conference, flanked by Scoop survivors.
"That is why our government is responding directly to remedy the ill-advised (policies) of the past."
Starting in 1874, 150,000 Indian, Inuit and Metis children in Canada were forcibly enrolled in 139 boarding schools run by Christian churches -- including the Catholic Church -- on behalf of the federal government in an effort to integrate them into society.
Many survivors alleged abuse by headmasters and teachers, who stripped them of their culture and language. At least 3,200 students never returned home. Ottawa formally apologized in 2008 for the "cultural genocide," as part of a Can$1.9 billion settlement with former students.