The city of Portland will receive $360,000 to release its ownership interest in a discontinued street that runs through a busy downtown parking lot.

While the strip of land has long been part of a parking lot near City Hall, the city had the right to reclaim it for $1 to turn it into an extension of Wilmot Street.

Whether the city should actually do that has been the topic of discussions for years, but those discussions intensified in 2013 and led to the settlement agreement. The deal includes $10,000 for upgrades to Lincoln Park.

“We’re pleased to have finally resolved this issue in the best interest of the city, and in the process attain funds for improvements to Lincoln Park,” City Hall Communications Director Jessica Grondin said in an email.

The discontinued street runs from Cumberland Avenue to Congress Street and directly through the Top of the Old Port parking lot. If the city had exercised its option to reclaim the 40-foot-wide, 420-foot-long street, it would have divided the lot into two parcels and eliminated at least 50 of the lot’s 530 parking spaces, which rent for $85 a month.

Chris Howard, the attorney for the lot owner, said both he and his clients are pleased that the issue has been resolved without having to go to court. The lot is owned by Pearl Cumberland LLC and managed by Anastasia Contos.

“That’s a valuable piece of property,” Howard said. “It was really in their interest to come to an agreement with the city and clear up what they saw as a cloud hanging over the title. Fortunately, these agreements don’t always have to come to a lawsuit to find middle ground.”

Howard said the resolution will allow the company to redevelop the property at some point in the future, though it has no immediate plans to do so and the family seems content to continue using the land as a parking lot.

The lot, bounded by Cumberland Avenue and Congress, Franklin and Pearl streets, has been the subject of dead-end developments for decades.

In 1987, developers wanted to build a 275-foot-tall, 22-story office tower on the site. Facing opposition, they scaled down the plan to four smaller office towers, ranging from nine to 15 stories. The project fell victim to a recession and was foreclosed on in 1991. Three years later, the property was sold to the Contos family of Boston for $1.9 million.

In 1999, the site was considered for a sports arena, but the project never moved forward.

Under the original agreement, any development of the site would have required developers to pay the city $60,000 to improve Lincoln Park, which is located just across Congress Street.

When the city, prompted by former City Councilor Kevin Donoghue, began discussing exercising its option to reclaim the street in 2010, the Contos family offered the city $60,000 to release that claim, but it never went anywhere.

An agreement was reached in December and made public last week.

“It took quite awhile to eventually come to the number, but both sides were pretty reasonable,” Howard said.