The Italy international's lawyers were due to present their case to a Premier League tribunal, who were due to hear his appeal against a club fine.
Press Association Sport understands City imposed a fine of two weeks' wages - a figure reported to be around £340,000 - on Balotelli last season for on-field indiscipline, causing his unrest.
But a brief statement from City on Wednesday read: "After amicable talks between the parties, as a sign of respect for Roberto Mancini, the supporters and the club, Mario Balotelli has chosen to accept a two-week fine levied upon him by the club and withdraw his disciplinary appeal, which was due to be heard by a Premier League panel today.
"Mario remains available for selection for all forthcoming fixtures."
