The television news magazine "Dateline NBC," which reports the payment in a segment to be broadcast Friday, did not disclose its source of information.
In the segment, retired Santa Barbara County Sheriff Jim Thomas says his office investigated Jackson in 1993 in connection with one boy's claim and came upon the second accusation.
The first boy reportedly was paid $15 million to $20 million by Jackson to avoid charges the entertainer thought would damage his career even if proved untrue.
Jackson has denied ever harming any child and is currently fighting charges he molested a boy in 2003.
Jackson's lawyer, Thomas Mesereau Jr., did not immediately return a call Thursday from The Associated Press. Lawyers in the current case are under a strict gag order.
"We always believed there were eight to 10 other children out there," Thomas told "Dateline."
But during interviews, he said, "Many of them said that they had spent time with Michael Jackson. They had spent time in his bedroom, but that nothing had happened. Some wouldn't talk to us at all."
Thomas told the AP the employee's son did not file charges and didn't want to testify "because he was afraid his friends would think he was homosexual."
Thomas has previously discussed the boy's claim, but said he wasn't sure until the Dateline report that Jackson had paid the boy $2 million.
"Dateline" said the settlement contained a clause barring it from being discussed publicly.
Thomas said the 12-year-old accused Jackson of "fondling him through his clothes," which could be the basis of misdemeanor charges. No charges were ever filed.
Both boys who accused Jackson in the 1990s are now in their 20s and are not expected to testify in the current case.
Jackson, 45, has pleaded not guilty to committing a lewd act upon a child, administering an intoxicating agent and conspiring to commit child abduction, false imprisonment and extortion. His trial is set to start Jan. 31, 2005.
By Linda Deutsch