The Sun has apologised and agreed to pay "substantial" libel damages to Cameron Diaz over false allegations published on its front page that she had a "three-minute snog" with a married man.

The star of Gangs of New York and Charlie's Angels sued the paper over an article published in May this year that claimed she had a relationship Shane Nickerson, the married producer of her MTV show Trippin'.

In a statement delivered in the high court this morning, Diaz's solicitor, Simon Smith, of law firm Schillings, said the allegations had caused "obvious distress" to the actor, her boyfriend Justin Timberlake and to Mr Nickerson and his wife.

"It was explained to the reader that he was a married man, married to a high school teacher and that he was also the father of a one-year-old daughter," Mr Smith told the judge, Mr Justice Eady.

The article said the actor had been caught out "while her pop star fiance prepared to go into hospital for a throat operation".

Mr Smith said that after undertaking an investigation, the Sun accepted that the incident "involved no more than Ms Diaz giving a friend a goodbye hug".

"Any suggestion of a romantic involvement is entirely untrue and without any substance whatsoever," he added.

Mr Smith told the court the Sun had "teased" readers by publishing a photograph of Diaz and Mr Nickerson on its front page under the headline "Riddle of Cameron's 3-min snog with a pal... and it wasn't Justin".

He said readers would "inevitably" have turned to page nine where the article was published along with the "equally sensational and descriptive headline 'Diaz's snog with producer - Cameron wrapped her arms around him and began to kiss him'".

Mr Smith said the publisher of the Sun, News Group Newspapers, had agreed to pay the actress "substantial, undisclosed damages and to reimburse in full the legal costs incurred by her in pursuing this matter". Diaz is also suing American Media, publisher of the National Enquirer magazine, which first published the allegations about Diaz and Mr Nickerson.

Benjamin Beabey, solicitor for News Group Newspapers, said the Sun's story had been based on the National Enquirer's coverage and that the Sun now accepted the allegations were "without foundation and ought never to have been published".

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