The two politicians released a joint statement this afternoon which said they had agreed to resolve their dispute.
"Both accept that the comments were made on a political occasion, but they disagree about what the comments were understood to mean.
"Neither party considers there is value in continuing with the dispute in the courts."
Mr Craig was seeking a retraction from Dr Norman after the Green MP said the Conservatives leader "thinks a woman's place is in the kitchen".
He had initially also sought a retraction of Dr Norman's comment that Mr Craig thought "a gay man's place is in the closet", but he later narrowed the scope of his case.
The comments were made by Dr Norman during a speech at the Auckland festival in February.
Mr Craig had not sought damages, and each party would cover their own costs, the joint statement said.
Both Mr Craig and Dr Norman sought donations from supporters to cover their legal fees.
Dr Norman expected his fees to be around $75,000 if the case went to court. If was not known how much he raised through his public appeal.
At last count, Mr Craig had raised around $50,000 for his cause.
Mr Craig had initially wanted the case to be fast-tracked so it could be resolved before the general election.
His party won 3.97 per cent of the party vote in the election, but failed to win a seat.
By Isaac Davison of the New Zealand Herald
