The city of Minneapolis will pay $US27 million ($A35 million) to settle a lawsuit by the family of George Floyd over his death in police custody, a case that stirred national protests over racial injustice and police brutality.

The announcement came as jury selection continued in the trial of Derek Chauvin, the former officer accused of murdering the 46-year-old black man as he made a routine arrest on a Minneapolis street.

Mr Floyd died in May as Mr Chauvin, a white Minneapolis police officer, kneeled on his neck for nearly nine minutes. Mr Floyd’s dying pleas for help were captured on widely seen bystander’s video, which helped spark one of the largest protest movements ever seen in the United States.

Mr Floyd’s sister Bridgett Floyd said in a statement that she and her family were “pleased that this part of our tragic journey to justice for my brother George is resolved”.

The trial of Mr Chauvin, who was fired by the police force, began earlier this week in Hennepin County’s district court on charges of murder and manslaughter. Mr Chauvin has pleaded not guilty.

Judge Peter Cahill has set aside about three weeks for jury selection in the high-profile case. Five men and two women had been seated as jurors as of Friday afternoon (local time).

Last year, Mr Floyd’s relatives sued the city, Mr Chauvin and three other police officers involved in federal court, saying police violated Mr Floyd’s constitutional rights.

The settlement includes a $US500,000 contribution from Mr Floyd’s family to the community at the Minneapolis intersection where Mr Floyd died, which has been barricaded against police access by residents and is filled with flowers and other tributes to Mr Floyd.

Family attorney Ben Crump said it was the largest pre-trial civil rights settlement ever, and “sends a powerful message that black lives do matter and police brutality against people of colour must end”.

Mr Chauvin was helping arrest Mr Floyd on the evening of May 25 on suspicion of his using a counterfeit $US20 bill to buy cigarettes.

The other three officers are due to go on trial later this year on charges of aiding and abetting Chauvin in Mr Floyd’s death. All four officers were fired the day after the deadly arrest.

-with AAP