The unnamed soldier referred to in court papers only as Soldier D, suffered a Non-Freezing Cold Injury (NFCI) as he walked in mud during an exercise in England in 2012.
His lawyers told how he and comrades were sleeping in tents in sub-zero temperatures when he was tasked with an early morning foot patrol on boggy ground.
They said he was given extra socks but no other clothes, so had to wear his already-wet boots.
His injuries, which are similar to trench foot and can cause acute long-term pain, left him on restricted duties.
He was medically discharged in 2016 after ten years’ service.
Soldier D’s solicitor Simon Quinn said: “NCFI is a common injury suffered on military exercise in the UK and abroad.
“Despite advances in clothing technology it remains a serious problem for the MoD”.
“My client suffered Stage Four non-freezing cold injuries”.
“Further exposure to the cold during service provoked a Pain Syndrome, disadvantaging him on the labour market.”
Mr Quinn said the settlement, among the biggest ever for NCFI, “reflects the serious nature of his injuries”.
But one source said: “There’s only one thing to blame for these injuries, incompetent soldiering.”