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The stories also claimed that the singer - a Muslim convert - would only speak to women other than his wife through a second party.
His lawyer told The High Court in London that "Mr Islam has never had difficulties working with women".
The World Entertainment News Network agency has already apologised.
'False impression'
Its article, entitled "Yusuf Islam ignores bare-headed women", was distributed to its subscribers including Contactmusic.com, read by more than two million people per month, which also published an apology on its website.
Mr Islam's laywer, Adam Tudor, told the court the allegations had caused the singer "considerable embarrassment and distress".
He said that the defendants now accepted that the claims were "entirely false" and had "created an utterly false impression of attitude to women"
"In his normal life, women feature among some of the most influential people in Mr Islam's team."
Mr Tudor added that the story "cast serious aspersions, quite wrongly, on his religious faith, which is of the utmost importance to him".
WENN and Contactmusic.com also agreed to pay the singer's legal costs, while the damages have been donated to his charity Small Kindness.
The musician, who converted to Islam in 1977, was not in court.
In 2005, Mr Islam won substantial libel damages from The Sun and Sunday Times after they falsely claimed he supported terrorism.
(BBC)
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