The company did not admit doing anything wrong, but says it will no longer describe its driver checks as "the gold standard"
Uber has agreed a multimillion dollar settlement with the cities of Los Angeles and San Francisco over allegations it misled customers about background checks on its drivers.
The ride-hailing app was accused of carrying out checks that were inferior to those faced by regular taxi drivers in the California cities.
Prosecutors said their investigation found more than two dozen drivers with criminal records working for the company.
One of those drivers had spent 26 years behind bars for second-degree murder but had applied to Uber using another name. He carried passengers on more than 1,000 journeys for Uber.
An investigation by the Los Angeles Times discovered four drivers working for Uber who would have been prevented from driving a taxi by their criminal record.
Uber's approach to background checks – using criminal database searches dating back seven years – has long been criticised by traditional taxi operators. They say the failure to run fingerprint check, as they do, compromises safety.
Prosecutors said they also found drivers who were unlicensed working for Uber along with those convicted of driving under the influence and other offences.
Uber has admitted no wrongdoing as part of the settlement but agreed to pay a civil penalty of $10m (€8.88m). It will have to pay a further $15m (€13.2m) if it does not comply with the terms of the agreement over the next two years.
The settlement follows a deal with Uber's rival Lyft in December 2014. Prosecutors say both companies are subject to a permanent injunction barring them from making untrue or misleading statements about their background checks.
Uber was founded in 2009 and was credited with revolutionising private transport. Users book and pay for journey through a smartphone app but the company’s rise has prompted protests from the taxi industry around the world.
San Francisco District Attorney George Gascón said: "The result we achieved today goes well beyond its impact on Uber.
"It sends a clear message to all businesses, and to start-ups in particular, that in the quest to quickly obtain market share, laws designed to protect consumers cannot be ignored. If a business acts like it is above the law, it will pay a heavy price."
In a statement Uber said it had addressed many of the issues raised in the lawsuit. It added: "We’re glad to put this case behind us and excited to redouble our efforts serving riders and drivers across the state of California."