The dispute began in May when Khan stepped in to block the Met from awarding Palantir a two-year, £50m deal for Scotland Yard to use AI to process intelligence in criminal investigations, in a system called unified operational analytics (UOA). Khan cited a "clear and serious breach" of procurement rules.
Palantir sued the mayor's office for policing and crime (Mopac) in June. The company, which also works for the Israeli military and the Trump administration in its immigration crackdown, faced criticism from Khan, who had previously said Londoners only wanted public money going to companies that "share the values of our city".
Louis Mosley, who heads Palantir in the UK and Europe, responded by accusing Khan of politicising procurement and said he was "putting politics above public safety". He said: "What Londoners value is not being mugged, not being raped by a serving police officer."
The agreement to drop the claims comes a month after Palantir hired Tom Watson, the former Labour party deputy leader, as a full-time lobbyist. The firm was concerned that if public authorities could block it from winning contracts due to objections over the values of its senior leadership, it would undermine its ability to operate in the UK.
Palantir is also facing a battle to retain its £330m NHS medical data contract amid a vociferous campaign from parts of the public and some MPs for it to be replaced by a less controversial company.
In a joint statement, Palantir and Mopac said Mopac's decision in May to block the contract "was not based on Palantir's values or ethics or any wider reporting about the company". The statement added: "Mopac recognises Palantir's concerns that media reporting of a statement from the mayor's spokesperson before the decision was taken could have incorrectly created the impression that an assessment of the company's values had been a factor in that decision." It said Mopac's consideration was based on its statutory role of examining spend proposals against legal tests and guidance on procurement, governance, affordability and value for money.
Khan said: "London is the technology capital of Europe, and I am proud that leading software firms choose the city as their home. Palantir makes a significant contribution to jobs and investment in the capital, employing a large number of Londoners whose services have been procured legally by organisations across the UK and beyond."