The payment is understood to include the £500,000 damages the Daily Star paid to Archer when he successfully sued the paper for libel after it published a story claiming he slept with prostitute Monica Coghlan while he was vice-chairman of the Conservative Party.
Archer is also believed to have paid around £1m in legal fees to the paper, which is owned by Express Newspapers.
The Daily Star served a writ against Archer after he was jailed for lying in court over his affair with Coghlan. The newspaper had been seeking as much as £3.6m in damages.
He was found guilty of perjury following revelations by Archer's former friend Ted Franc published in the News of the World, which said that he provided a false alibi for Archer at the trial in 1987.
The payout comes on the heels of a £360,000 payment to the News of the World, from which Archer won £50,000 damages over the same scandal.
Archer is in prison in Lincoln, serving a four-year term for perverting the course of justice on two counts and two counts of perjury.
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