The city has reached a settlement with the Legal Aid Society to end a 25-year-old lawsuit over homeless services.

In agreeing to end its suit, the Legal Aid Society secured formal assurances from the city that it would recognize a legal right to safe emergency shelter for homeless families with children who have nowhere else to turn.

Mayor Bloomberg said yesterday that the deal would allow the Department of Homeless Services to operate more efficiently and independently because it ends court oversight of the city’s homeless services.

“Year after year, needing to clear every move through multiple layers of legal review eventually became counterproductive,” he said at a press conference at City Hall to announce the agreement. “It inevitably created delays, impeded change, and stifled innovation.”

The lawsuit, McCain v. Koch, was initially launched in May 1983 and alleged that the city had failed to provide adequate shelter and procedures for dealing with homeless families with children. As a result of the suit and similar ones that followed, a series of court orders established that homeless families with children had a legal right to shelter. With an agreement reached, the city will now no longer be subject to court oversight in crafting its homeless policy. Future disputes will be taken up in new litigation rather than a reopening of the 1983 suit.

The impact of the decision on city policy was not immediately clear. The corporation counsel for the city, Michael Cardozo, said that while the city had “tweaked” its procedures, “basic practices are not changing.”

Homeless advocates have criticized the city for failing to reduce the homeless population despite an ambitious five-year plan begun in 2004 to cut the number of homeless by two-thirds. While the average number of single adults in shelters per day has declined to 6,850 this year from 8,444 in 2004 and the average number of families with children in shelters has declined to 7,802 this year from 7,977 in 2004, the drop-offs fall far short of the plan’s goals.

The executive director of the Coalition for the Homeless, Mary Brosnahan, said yesterday that she thought the agreement was a positive development but that the mayor would need to improve his performance now that he has been given greater control over homeless services.

“I think it’s sink or swim,” Ms. Brosnahan said. “The mayor is over four years into his five-year plan, and the numbers are not going into the right direction.”