The total sum of $1.7 billion was related to an arms deal that Iran signed before 1979 when the Shah was a close ally of the United States but Washington was refusing to give it back.
When the news of the Obama administration’s $400 million payoff was first broken it set off a firestorm in the United States.
The partisan bickering which followed the payment was so intense that few people asked about what happened to the balance of the Iranian money.
US government officials have now revealed that the remaining $1.3 billion was sent less than two months after Iran received the first installment in cash in January.
"Iran received the balance of $400 million in the Trust Fund as well as roughly $1.3 billion representing a compromise on the interest," US Assistant Secretary of State for Legislative Affairs Julia Frifield has said.
The payment was confirmed by the State Department official to The Weekly Standard, an opinion magazine published by the American mass media behemoth News Corporation reported on Tuesday.
Wooden pallets stacked with euros, Swiss francs and other currencies were flown into Iran in an unmarked cargo plane to cover the first $400 million.
Although the "mechanics" of the second payoff was not confirmed, it was most likely made in cash since the US has no banking relationship with Tehran, The Weekly Standard speculated.
“The reason that we had to give them cash is precisely because we are so strict in maintaining sanctions — and we don’t have a banking relationship with Iran — that we couldn’t send them a check,” President Barack Obama said early this month.
A number of US politicians have accused Obama of paying "ransom" even though the money belonged to Iran.
Both Iranian and US government officials have stressed that the payment was unrelated to the nuclear deal struck with the Islamic Republic in July.