FRANKFURT—Suzuki Motor Corp. will pay an undisclosed amount in damages to Volkswagen AG, ending a long-running dispute between the two car makers that involved an alleged breach of contract by the Japanese company to purchase diesel engines from its German peer.

A Volkswagen spokesman declined to comment on the amount of damages, but said on Wednesday that Suzuki and Volkswagen, now in the midst of an emissions scandal involving its diesel cars, have settled all open issues of the dispute.

Suzuki said on its website Wednesday that it had "reached a settlement with Volkswagen," and that it had concluded arbitration proceedings with the company.

The agreement also marks the final end of a failed tie-up between Volkswagen and Suzuki after four years of arbitration.

In late 2009, the two companies struck a deal to cooperate in emerging markets, and work together on the development of fuel-efficient small cars. As a part of the deal, Volkswagen purchased a 19.9% stake in Suzuki, while Suzuki acquired a 1.5% stake in Volkswagen.

Suzuki in September repurchased its own shares from Volkswagen for about ¥ 429 billion, following an order in August by The London Court of International Arbitration. The court also said that Suzuki had breached the alliance agreement, and Suzuki said it may have to pay damages to Volkswagen.

The sale of its 20% stake in Suzuki added about €3 billion to German car maker's liquidity.

Write to Hendrik Varnholt at hendrik.varnholt@wsj.com

(END) Dow Jones Newswires

February 10, 2016 08:05 ET (13:05 GMT)