A former Army bomb disposal expert suffering from post-traumatic stress disorder has reached a six-figure compensation deal with the Ministry of Defence, his lawyers said.
The Oxfordshire man said he might not have suffered a breakdown in 2004 if his condition was addressed sooner.
His solicitor, Claire Roantree, said she hoped the MoD had been reminded of their "continuing duty of supervision".
The MoD said the settlement was reached "to the satisfaction of all concerned".
The former serviceman, who cannot be named for security reasons, served in the Gulf War, Northern Ireland, Bosnia, Nigeria and Sierra Leone.
His duties included defusing bombs and dealing with the aftermath of terrorist attacks.
The former serviceman said: "I feel that treatment or at least monitoring may have prevented my eventual breakdown and I would have remained a valuable asset to the military, especially in the present climate of operations.
"I can only hope that others in my situation - [former soldiers] and still serving - who seek help or are suffering from PTSD receive the treatment they need and deserve to rehabilitate or assist them in their lives, not only for their sake but also their loved ones."
The ex-soldier underwent psychometric testing in 1998 and 1999 and was cleared to continue serving on operations by a senior Army psychiatrist, despite also having been asked to appear in a training video about PTSD and its symptoms.
He was only formally diagnosed as suffering from post-traumatic stress disorder (PTSD) in June 2004 after being seen by a civilian consultant psychiatrist, according to his legal team.
The man was involved in a car accident just two weeks later and his symptoms deteriorated so badly that he had to be medically discharged from the Army and was unable to return to work.
His lawyers claimed that the MoD's failure to formally diagnose him in the late 1990s, monitor and treat the condition, left him more vulnerable to future stressful events.
Initially, the MoD argued that the former serviceman had knowledge of his PTSD from being tested in 1998 and 1999, and had only three years after that to bring his claim for negligence.
However, the case was eventually settled out of court for a six-figure sum with liability split 40% to the MoD and 60% to the insurers covering the car accident, according to his legal team.
An MoD spokesman said: "When compensation claims are received they are considered on the basis of whether or not the Ministry of Defence has a legal liability to pay compensation. Where there is a proven legal liability, compensation is paid.
"Following a meeting on July 28, 2010, between the parties involved in the claim, a negotiated settlement was agreed to the satisfaction of all concerned."
The MoD added that it was always looking at new ways to improve the mental health care provided to members of the armed forces.
It said: "The defence secretary has placed a renewed focus on mental health provision across the forces and will be looking at the specific pressures on personnel such as EOD (explosive ordnance disposal) operators."
Ms Roantree said the case highlights "the potential liability of military psychiatrists and officers when signs of PTSD appear and their joint responsibility in ensuring that Army personnel are properly monitored and treated".
"PTSD is unfortunately still a taboo subject in the Army, and I hope that this case serves to remind the MoD that they have a continuing duty of supervision and monitoring," she said.