Victoria's police force is not racist but will hold an inquiry to ensure racial profiling does not occur, the chief commissioner says.
Victoria Police will review procedures for stopping and searching people on the streets and the multicultural training offered to officers as part of its settlement with a group of African-Australian men.
The group has alleged police repeatedly stopped and searched them because of their race rather than for legitimate reasons while they were living in Flemington from 2005 to 2009.
Some of the six men also say they were bashed by police.
Victoria Police denies the allegations.
Chief Commissioner Ken Lay said his officers did not target people based on their ethnicity.
"I'm satisfied our members check people on the street if they believe they're acting suspiciously; if they believe their welfare is in danger; if they believe a criminal offence may have been created nearby," Mr Lay told reporters in Melbourne.
"I do not believe our members would identify people and harass and continually check them simply because of their ethnicity."
Jeremy Rapke QC, representing the group, announced the two parties had agreed to the settlement in the Federal Court on Monday.
As part of the agreement, Victoria Police has acknowledged any policing involving racial profiling was unacceptable.
It will invite public comment on officers' practices in the field and the multicultural training program before undertaking the review.
A report on the inquiries will be published in December.
The action between Victoria Police and the group, including Daniel Haile-Michael, Jibril God, Shuab Ali, Maki Issa, Hakim Hassan and Magnus Kaba, began in 2010.
Mr Lay said Victoria Police had spent more than $3 million on the case but had avoided spending an additional $3 million by settling before a lengthy trial.
Despite denying that racial profiling existed, Mr Lay said he was happy to undertake any review that could improve police processes.
Outside court, Mr Haile-Michael said the settlement would see "racial profiling" tackled in a systemic way.
"It's not about one police officer. It's about changing the whole system," Mr Haile-Michael said.
"We're all victims of racial profiling in one way or another. It could be the mother that looks at her child every time a young African guy gets on the tram because of the racial profiling that exists not just in Victoria Police, but in the community in general."
Mr Lay would not comment as to whether the six men had received financial compensation as part of the settlement.