G4S, the security company forced to apologise after failing to meet its Olympic Games contract, is to donate £2.5 million to the Armed Forces as a "goodwill gesture".
18,200 military personnel were drafted in after the private security firm admitted it couldn't provide 10,400 staff for the Games.
Defence Secretary Philip Hammond said the donation would "go some way" to recognising the burden placed on the armed forces by the security shambles.
He added: "The Armed Forces provided more to the security and protection of the Games than had originally been planned, but as always they have carried out their tasks with professionalism and good humour."
The £2.5 million donation will go towards welfare amenities including sports equipment and to sports associations which have backed serving athletes, including rowing gold medallists Captain Heather Stanning and Lieutenant Pete Reed.
Chief of the Defence Staff General Sir David Richards said: "The Armed Forces are pleased to accept this donation from G4S. It recognises all the hard work and commitment Service personnel have displayed during the London 2012 Olympic Games."