The former Leeds and Aston Villa boss had taken the claim for 5.2million US dollars to FIFA following his dismissal one year into a three-year contract.
The League Managers' Association (LMA) said despite having sacked O'Leary, Al Ahli claimed the Irishman had abandoned his job.
"Club officials had openly stated to the media at the relevant time that there had been a dismissal," said an LMA statement.
The club also argued that FIFA lacked jurisdiction to hear the claim.
FIFA rejected both lines of defence and awarded O'Leary, who was backed by the LMA and represented by Paul Gilroy QC and solicitor Michael Kennedy, the full sum due under his contract.
O'Leary said: "It has taken a long time to deal with this matter but I am pleased that all issues have now been finalised. I hope my case provides reassurance to all managers and coaches working all over the world that there is a formal system in place that provides employment protection."
Richard Bevan, chief executive of the LMA, thanked the Football Association for their help in taking the case to FIFA.
Bevan said: "We are clearly delighted with the outcome. In addition, the LMA is extremely grateful to the FA for their assistance in initiating the process with FIFA.
"The added significance and wider impact of this process is the proof that FIFA has mechanisms in place which regulate worldwide employment issues."
Source: PA
Source: PA