Larycia Hawkins was placed on administrative leave from Wheaton College in December after posting a picture of herself wearing a hijab on Facebook.
Hawkins said she was standing "in religious solidarity with Muslims because they, like me, a Christian, are people of the book."
Her statement came amid a swell of Islamophobia in the wake of attacks in Paris and San Bernardino, California.
The school faced a backlash in which it was accused of bigotry and curtailing academic freedom.
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The idea that Christians and Muslims worship the same God is a direct contradiction of the core of the college's statement of faith, which affirms that salvation is achieved through Christ alone.
Faculty and staff members are expected to commit to "accept and model" the college's statement of faith with "integrity, compassion and theological clarity," Wheaton said in a statement.
While Hawkins received a groundswell of support that included demonstrations on campus, some Muslims also expressed unease at her assertions that they share the same God.
After initiating a termination process in January, the college and Hawkins said in a joint statement yesterday that they had "found a mutual place of resolution and reconciliation."
The statement said the two parties reached "a confidential agreement under which they will part ways.