Carlton Duncan, head of the George Dixon school, a grant-maintained inner-city secondary, was awarded an undisclosed sum for damages in the High Court.
Mr Duncan also received a full apology this week from solicitors representing Philip Rose, a former councillor, and the city council. They were also ordered to pay the costs of the case, which are expected to exceed Pounds 100, 000.
Mr Rose wrote to parents of around 600 pupils on council notepaper at the time of the ballot, the court heard, alleging the head had let pupil numbers fall, wasting money by mismanagement.
A full retraction of the claims was made in open court. In a statement, solicitors said: "The defendants accept that there was no basis for criticism of the plaintiff's management skills and they tender their sincere apologies to him for the distress caused by the letter."
Mr Duncan is still head of the school, which went grant-maintained in January 1993 with a majority of 69 per cent, and now has 800 pupils.
He said: "I now feel very relieved and satisfied that justice has been done, but I also regret that the situation was not resolved in the first place by a simple apology.
"It is true to say that at the time Birmingham attacked quite bitterly any attempt to opt out of local authority control. But I was the only headteacher who came under personal attack."
A council spokesman said the authority would not make any further comment about the case. She said: "The cost of the case will not be borne by the taxpayers, but will be covered by our insurers."