Stephen Mader, 27, filed a lawsuit against the city of Weirton, West Virginia, following his dismissal from its police force in June 2016.
It was reported at the time that the former officer refused to fire on the man because he believed he was trying to get himself shot.
The gun the man was carrying was later found to be unloaded.
It has now emerged that Mr Mader, a former Marine, has been awarded a settlement of $175,000 for wrongful dismissal.
The American Civil Liberties Union (ACLU), which backed his case, said when the officer arrived on the scene at a domestic incident he found a man named as R J Williams in a visibly distraught state.
When the white officer told Williams to drop the weapon he was carrying, he refused and told Mr Mader to shoot him, according to the ACLU.
Rather than shoot, Mader returned to his military training and attempted to de-escalate the situation, the ACLU account said.
He softened his voice, looked Williams in the eye and said ‘I’m not going to shoot you, brother. I’m not going to shoot you’.
Two more officers arrived on the scene and one of them fired four shots, killing Williams.
Officials with Weirton City authorities later claim Mader froze. As a result, they fired him.
The officer who fired the shots that left Williams dead was cleared of any wrongdoing.
The incident came at a time when tensions were raised after a series of shootings of black men by white officers.
News Source SkyNews