WASHINGTON - The Obama administration yesterday proposed spending more than $3 billion to settle a long-running lawsuit with American Indian tribes that claim they were swindled out of billions in royalties for oil, gas, grazing and other leases dating back more than a century.

Under an agreement announced yesterday, the Interior Department would distribute $1.4 billion to more than 300,000 Indian tribe members to compensate them for historical accounting claims, and to resolve future claims. The government also would spend $2 billion to buy back and consolidate tribal land broken up in previous generations. The program would allow individual tribe members to obtain cash payments for land interests divided among numerous family members and return the land to tribal control.

The settlement also would create a scholarship account of up to $60 million for tribal members to attend college or vocational school.

If cleared by Congress and a federal judge, the settlement would exceed the combined total of all previous settlements of Indian claims.

Last year, a federal judge ruled that the Indian plaintiffs are entitled to $455 million, a fraction of the $47 billion or more the tribes have said they are owed for leases that have been overseen by the Interior Department since 1887.

President Obama said settlement of the case was an important step to reconcile decades of acrimony between Indian tribes and the federal government.

"As a candidate, I heard from many in Indian Country that the Cobell suit remained a stain on the nation-to-nation relationship I value so much," Obama said. "I pledged my commitment to resolving this issue, and I am proud that my administration has taken this step today."

Elouise Cobell, a member of the Blackfeet Tribe from Montana who was the lead plaintiff in the case, called the proposed settlement crucial for hundreds of thousand of Native Americans who have suffered for more than a century through mismanagement of the Indian trust.