Removing Save The Children Australia from the Nauru Regional Processing Centre in October 2014 was handled badly, the Department of Immigration and Border Security said on its website.
The Department said it had agreed on a confidential compensation package and it "regrets" the way the issue was handled.
Initially the government acted on advice that SCA staff were agitating refugees in the Nauru detention centre and helping to organise protests.
The removal of SCA staff was subject to a review released in January, which said there was not sufficient evidence to back the Department's decision to remove SCA staff. The review recommended the staff receive compensation.
"The Department regrets the way in which, until the Department released Professor Doogan’s review in January 2016, the allegations relied on by the Department to issue the removal direction may have led other NGOs and members of the public to question the integrity of SCA as a provider of government services or, to the extent that it may be relevant, as a child rights organisation," the Department's website said.
SBS News has contacted SCA for comment.
