The former student was sexually abused at Beaumaris Primary School by Darrell Ray, one of four pedophiles who taught at the school in Melbourne's southeast in the 1960s and 1970s.
Rightside Legal partner Michael Magazanik, who represents the man, said the civil claim was close to reaching the Supreme Court before the Department of Education agreed to settle.
The $8 million settlement, plus legal costs, is the biggest known payout by any government to a sexual abuse survivor in Australian history.
"No Australian court has ever ever awarded an abuse survivor more than this," Mr Magazanik told AAP on Thursday.
"No government has ever paid via settlement or verdict more than this."
Minister for Children Lizzie Blandthorn deferred repeated questions from journalists about the settlement to Education Minister Ben Carroll.
Mr Carroll's office and the education department have been contacted for comment.
Mr Magazanik said his client was abused in the early 1970s by Ray, who died in November while facing dozens of new charges.
He reported the abuse to police and was part of a criminal prosecution in the 1990s and early 2000s that led to Ray pleading guilty to 27 counts of indecent assault on 18 boys under the age of 16.
Ray was subsequently sentenced to three and a half years in prison.
The victim later won a "small sum of money" in a civil suit but was able to launch another bid for compensation about 18 months ago under new laws.
"This is really the culmination of a 50-year process," Mr Magazanik said.
"This man has suffered really profound, lasting consequences."
Mr Magazanik said the survivor lived in poverty and struggled with his mental health, with the compensation opening the door to proper housing and care in his remaining years.
Due to his pending claim, the man did not give evidence at the Victorian government's board of inquiry into the sexual abuse of students at Beaumaris and 23 other government schools.
An inquiry chaired by Kathleen Foley found the education department failed to protect children. (Con Chronis/AAP PHOTOS)
The inquiry's final report, released in March, found the education department "woefully failed to protect children from the risk" of sexual abuse because it did not have policies to deal with allegations or convictions.
Mr Magazanik branded Beaumaris Primary a "black hole" and "complete diaster" of the government's own making, declaring his client and others were abandoned to the mercy of pedophiles.
"There were multiple pedophiles there (and) the government turned a blind eye to it," he said.
"None of this would have happened if it had taken its responsibility, even a quarter seriously."
Mr Magazanik confirmed his firm is representing other abuse victims who went through the government school system, including former students of Beaumaris.
Victims of institutional child sexual abuse who access the national redress scheme are locked out from pursuing compensation through the courts, he warned.
In response to the inquiry, Premier Jacinta Allan committed to deliver an apology in parliament to victims of historical sexual abuse in public schools across Victoria in 2026.
The formal apology will follow a truth-telling process to hear from all victims of abuse at government schools prior to 2000.
A public memorial will also be set up to acknowledge Beaumaris victims, along with a restorative engagement program.
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National Sexual Abuse and Redress Support Service 1800 211 028
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