Investigative journalist Nicky Hager has accepted a police apology and payment of "substantial damages" following the unlawful search of his home during the investigation into the hacking that led to the Dirty Politics book.

The settlement revealed police had sought information claiming Hager was suspected of criminal behaviour including fraud.

"Police accept that they had no basis for such allegations," the settlement document read.

"Police apologise unreservedly for these breaches of his rights and have agreed to pay Mr Hager substantial damages and a contribution towards his legal costs."

The settlement also included police making a key admission around accessing Hager's banking data - a practice used by police to get people's personal financial information without any legal order.

The settlement comes almost four years after the publication of Dirty Politics, which alleged the office of former Prime Minister Sir John Key ran a dirty tricks campaign through right wing bloggers.

Hager wrote the book after an anonymous source known only as Rawshark provided information said to have been hacked from Whaleoil blogger Cameron Slater.

The aftermath of Dirty Politics saw National's Judith Collins - a close family friend of Slater - resign as a minister and the resignation of one of the Prime Minister's staff.

But it also saw police launch an investigation into the identity of Rawshark after Slater complained about being a victim of hacking.

It was this complaint that led detectives to Hager's home on October 2, 2014, to carry out a search which saw computers, paperwork and other material taken for investigation.

Subsequent legal action forced the destruction or return of the material, and prompted High Court concern over the way detectives obtained and executed the warrant.

Hager said: "The Police have admitted that many things they did in their investigation and search were unlawful. This sends a vital message that people can share important information with journalists with confidence that their identities will be protected.

"The Police have apologised for threatening that confidentiality and trust."

The settlement agreement with police was released today by Hager's lawyer, Wellington barrister Felix Geiringer.

Hager said the agreement meant he was not allowed to say how much had been paid to settle the claim.

"However, it gives the strongest possible indication that Police accept the harm they caused and are much less likely to treat a journalist this way again. The money will help support important work in years to coming."

The settlement saw police concede that officers applying to a judge for the search warrant left out key details when seeking judicial sign off. Among details left out was Hager being a journalist and the intent of the search was to get confidential source information.

As a result, police ignored legal protections for journalists' sources which "threatened" the ability of Hager and of the "wider media" to obtain information from confidential sources.

The settlement document stated: "Police failed to mention in their application for the search warrant that they sought information to identify one of Mr Hager's confidential sources and failed to mention that Mr Hager was a journalist who could claim journalistic privilege."

The police concession follows High Court criticism that detectives applying for the warrant "failed to discharge their duty of candour and the warrant was unlawful".

There was also concern from the High Court over whether there were even grounds to get a warrant.

"Police accept the High Court's preliminary assessment," the settlement stated. The settlement stated police accepted the "search warrant was overly broad and should have contained conditions to address concerns raised to protect journalistic privilege".

In the settlement, police apologised for a range of breaches of Hager's rights, including wrongly using an exception in the Privacy Act to access 10 months of Hager's banking data from Westpac.

"Police acknowledge that Mr Hager had a reasonable expectation of privacy in relation to that information."

The NZ Herald has detailed how police would use the exploit frequently to get detailed, personal information about people who were of interest. A recent Supreme Court judgment has confirmed a "production order" - generally called a search warrant - is needed to get such information.

Geiringer said police now accepted a warrant was needed to get banking data.

The settlement also saw police admit key information had been left out of the warrant application used to get a judge to sign off on permission to search Hager's home.

During the search of the house, police took a photograph of a printed copy of an email exchange involving Hager and used it to make inquiries.

Detectives also photographed documents with login information for online accounts and attempted to access those internet services.

Mobile phone details were also obtained and used as the basis for production orders from phone companies.

"Police acknowledge that these were breaches of Mr Hager's legal right to protect his sources that should not have occurred," the settlement said.

The police inquiry included detectives seeking private information about Hager from Air New Zealand, Paypal, NZ Customs, and Jetstar. In each case, police did not disclose Hager's status as a journalist legally entitled to claim privilege to protect courses.

The settlement agreed: "These were breaches of their duty of candour in each instance."

The book alleged Slater attacked public servants and others at the behest of National Party figures, that the Prime Minister's office enabled him to get information used to attack political opponents and that he was paid to carry out "hit jobs" on his blog by others.

Details of the settlement were initially embargoed until 11am today but details of the settlement emerged on social media.