LOS ANGELES (Reuters) - Actress Katie Holmes has reached a settlement in her $50 million defamation lawsuit against celebrity magazine Star over an article that falsely suggested she was a drug addict, her representative said on Wednesday.

Star magazine also published an apology in its May 9 edition, on news stands on Wednesday, and said it was making a "substantial donation" to a nonprofit dance foundation supported by the actress.

Holmes, the wife of Tom Cruise, filed a lawsuit in Los Angeles in March over a January edition of the magazine with the coverline "Addiction Nightmare. Katie Drug Shocker!"

The inside story made no allegations of drug use but referred to counseling sessions in the Church of Scientology. Cruise is one of Hollywood's leading Scientology followers, and his five-year marriage to Holmes is a frequent source of speculation in celebrity media.

Star magazine said in its printed apology that the magazine "did not intend to suggest Katie Holmes was a drug addict or was undergoing treatment for a drug addiction."

Holmes was seeking $50 million in damages but the financial terms of the settlement were confidential, her representative said in a statement. Star magazine is published by Florida-based American Media Inc, whose group includes tabloid weekly The National Enquirer.

"I'm pleased that this lawsuit could be resolved amicably and accept American Media's apology. With this dispute out of the way, I look forward to once again focusing my attention on my family and career," Holmes said in a statement.

Holmes' attorney, Aaron Moss, said the lawsuit should serve "as a lesson to other tabloids that if they print false and defamatory stories about Katie, she will stand up for her legal rights."

Star magazine's donation will go to the Dizzy Feet Foundation, a charity that helps underprivileged American youngsters pay for dance classes.

(Reporting by Jill Serjeant)