After years of clashes in the street and the courts, the New York Police Department has agreed to a legal settlement that will overhaul how it handles demonstrations, including banning the tactic of boxing in protesters and then arresting them.

In addition to ending that practice, known as kettling, the department will use a tiered system of de-escalation before deploying officers and will install a high-ranking executive to ensure compliance with the new rules.

The department agreed to the sweeping changes as part of a deal filed in federal court on Tuesday with the office of Letitia James, New York’s attorney general. She had sued the agency in January 2021 over what she called widespread abuses during protests the previous summer after the killing of George Floyd in Minneapolis.

The settlement, which capped a fight that began after images of violent confrontations between the police and protesters stunned residents and municipal leaders, will force the country’s largest department to dramatically change how it responds to peaceful demonstrations.

The deal set off immediate opposition from the city’s largest police union, whose leader said it would put officers at risk when people take to the streets. But the plaintiffs were thrilled with the latest turn in the New York’s long-running civic debate over how to manage public dissent.

“This is huge,” said Donna Lieberman, the executive director of the New York Civil Liberties Union, which was a party to the suit. She added that the plan would reduce conflict and intimidation of peaceful protesters.

“This settlement represents a major overhaul of the N.Y.P.D. response to protests,” she said. “Instead of deploying a massive command-and-control response, the N.Y.P.D. will be required to employ a graduated response.”

More than 2,000 demonstrators were arrested during the protests three years ago, most of them while protesting peacefully. An investigation by the attorney general’s office found that police officers beat protesters with batons, rammed them with bicycles, arrested legal observers and medics without justification and used the containment strategy in which protesters were penned in by the police, then charged at or beaten with batons.

Commissioner Edward Caban said on Tuesday that the protests had “presented many unique challenges for officers, who did their best to protect people’s rights to peaceful expression while addressing acts of lawlessness.” But he said that the agreement “represents the department’s commitment to continually improving to ensure the public remains safe and individual rights are protected.”

The kettling strategy was broadly defended at the time by Mayor Bill de Blasio and the police commissioner, Dermot F. Shea, who pointed to looters who had ransacked parts of Manhattan after largely peaceful demonstrators had marched through the streets.

The scenes of looting, fights with protesters and destruction of police cars led Andrew Cuomo, then the governor, and Mr. de Blasio to impose a curfew and announce that they would deploy twice as many police officers.

But defense attorneys and civil liberties organizations said the department went too far in its response, conflating peaceful protesters with looters and arresting demonstrators en masse for charges like disorderly conduct and disorderly assembly.

“The right to peacefully assemble and protest is sacrosanct and foundational to our democracy,” Ms. James said in a statement. “Too often, peaceful protesters have been met with force that has harmed innocent New Yorkers simply trying to exercise their rights.”

Last March, the city agreed in a separate legal settlement to pay $21,500 to each of hundreds of demonstrators who were subject to kettling in the Bronx during racial justice protests.

Mayor Eric Adams said that Tuesday’s deal struck a proper balance. “Our administration is committed to improving our policies to keep New Yorkers safe and protect their civil liberties,” he said in a statement.

According to the settlement, the department will be monitored by a committee made up of representatives from Ms. James’s office, the commissioner of the Department of Investigations, the New York Civil Liberties Union, the Legal Aid Society and other agencies. The police executive assigned to supervise protest responses would also be a member of the committee.

That group will oversee the department’s implementation and compliance with the new reforms, according to the settlement.

The goal is for the committee to collaborate, said Corey Stoughton, a lawyer at the Legal Aid Society, which filed a lawsuit against the department with the New York Civil Liberties Union that was later combined with Ms. James’s suit.

The Detectives’ Endowment Association and the Sergeants Benevolent Association, which both signed the agreement, offered suggestions and input to help develop the language of the settlement, Ms. Stoughton said.

The agreement, she said, “represents the N.Y.P.D. wanting to commit to this novel approach to policing.”

The Police Benevolent Association, the city’s biggest police union, did not sign the settlement.

“We have serious concerns about its impact on the safety of police officers and all New Yorkers in future situations involving coordinated violent actions,” Patrick Hendry, the union’s president, said in a statement. “Once again, police officers on the street are being left to bear all the burden of so-called ‘solutions’ to problems we didn’t create, while the real causes of the chaos remain unaddressed.”

Mr. Hendry said that almost 400 members of the department were injured during the 2020 protests. The settlement, he said, “may serve to encourage future violence” and would “expose police officers to more discipline for taking lawful and appropriate police action.”

Molly Biklen, the deputy legal director of the New York Civil Liberties Union, said that by creating more oversight and de-emphasizing force, the department would uphold “its oath to protect New Yorkers’ right to protest.”

The agreement, which must still be signed by a federal judge, will take three years to implement. The department will adopt training procedures for a new four-tiered response system.

The first tier response would be used for peaceful protests, with officers from the community affairs unit dispatched to communicate directly with protest leaders and explain to them any police action that might be taken.

The number of officers would increase and the response would intensify in cases when officers believed illegal activity was about to occur or when the protest would block “critical infrastructure.” The response would be further heightened if there was probable cause that a crime had been committed.

Tier four, which would end the protest, would be activated if protesters tried to get into or block the entrance of “sensitive locations” like a precinct, courthouse or hospital or when crimes were so widespread that de-escalation or “targeted enforcement has not worked or cannot work,” according to the settlement.

Before ending the protest, officers would have to warn the crowd, point out where the crowd could disperse, and identify another location to continue to the demonstration “if feasible,” the settlement said.

Officers would be disciplined if they were found to use force “to punish, retaliate, coerce, or harass a subject” who engaged in legally protected demonstrations.

The settlement says: “No individual will have any force used against them on account of their lawful First Amendment speech.”