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Target, Kmart and Toys R Us retailers agreed to pay $454,000 in civil penalties and other fines to settle claims related to lead in children's products.
The lawsuit was filed two years ago after toys were found to have been made and/or sold with unsafe levels of lead paint.
The retailers, along with several manufacturers including Mattel Inc., were sued by the California Attorney General's office and the Los Angeles City Attorney's office in November 2007, the L.A. Times reports.
The products violated federal toy safety standards and Proposition 65, a state law dealing with toxic substances, and led to a rash of recalls in 2007 and 2008.
In the settlement, Target is scheduled to pay $210,000, Toys R Us $175,000 and Kmart $69,000.
The furor over the sale and importation of toys containing lead and other toxic materials led to new federal legislation.
Last year, Congress passed the Consumer Product Safety Improvement Act. It not only sets mandatory safety standards for products used by children under the age of 12 but requires manufacturers to test their products to prove that they were safe.
Before this law was passed, testing of toys was not required, and compliance with safety standards was voluntary.
Lead can be toxic if ingested and is considered particularly dangerous for children, whose brains and nervous systems are more sensitive to its effects.
"Our enforcement action will serve as a reminder to companies that they have a responsibility to make sure that children aren't exposed to harmful chemicals from their toys," said Harrison Pollak California’s deputy attorney general.