The Leopold Museum in Vienna reached a settlement Wednesday with one of the heirs of a Jewish art collector, partially ending a long-running tug-of-war over a painting by Austrian painter Egon Schiele (1890-1918).

The museum said in a statement it had agreed to pay $5.0 million (3.5 million euros) to the sole granddaughter of Austrian collector Jenny Steiner for her share in the 1914 painting "Houses by the Sea" which was looted by the Nazis in World War II.

Steiner fled Austria first to Paris and then to the United States after the so-called "Anschluss" or annexation of Austria by the Nazis in 1938.

The painting was put up for auction in 1941 and subequently sold to Rudolf Leopold, the museum's founder, in 1955.

Steiner's descendants had demanded the return of the painting, but the Leopold Museum, as a private institution, is not bound by the restitution law.

It argued that "Houses by the Sea" was an indispensable part of its collection and offered to pay $25 million to Steiner's heirs in compensation. However, only the collector's granddaughter accepted, while two other groups of descendants did not.

Last year, the Leopold Museum paid $19 million for another Schiele painting "Portrait of Wally" after years of legal wrangling with the family of the painting's previous Jewish owner.

Last week, the museum said it would sell another key painting by Schiele to help finance that acquisition.

Schiele (1890-1918) was one of Austria's major expressionist painters alongside Gustav Klimt and Oskar Kokoschka.  -AFP