Smoke and dust engulf much of lower Manhattan and the area around the World Trade Center in New York, in this September 11, 2001 handout file photo taken by the New York City Police Department and obtained by ABC News, which claims to have obtained it under the Freedom of Information Act. (Xinhua/Reuters Photo)

New York City officials have agreed to pay compensation to thousands of rescue and clean-up workers who were sickened by dust following the 9/11 terrorist attacks in 2001.

Up to 657.5 million U.S. dollars may be paid out in the settlement if agreed by the plaintiffs. The deal must be approved by 95 percent for it can take place. The money would be issued from a federally financed insurance fund of almost 1 billion dollars that the city controls.

Following the collapse of the twin towers a toxic cloud containing particles of asbestos, lead, glass and cement covered much of Manhattan. Many claimants have spoken of severe respiratory illnesses following the attacks.

Rescuers spent weeks amid the smouldering wreckage and choking dust in Lower Manhattan, but few were adequately insured for such work. The government set up a special insurance company to handle claims if any of them ended up injured or sick. As a result claims came flooding in, many for cancer and respiratory illness caused by dust.

A claims adjudicator, chosen by the lawyers involved in the case, will decide on the validity of each plaintiff's claim and how much compensation they were entitled to. Some workers are expected to receive payments of only a few thousand dollars, while others could be in line to receive more than 1 million dollars, depending on their injuries.

The agreement follows a long battle in the courts, but must still be approved by a judge and agreed to by the claimants. In a statement, New York Mayor Michael Bloomberg called the settlement "a fair and reasonable resolution to a complex set of circumstances".