The payment comes some nine months after Israel agreed to pay the families of those killed, and is aimed at restoring Turkey-Israel ties.
Israel has completed its $20 million compensation payment to families of victims from the 2010 Mavi Marmara tragedy, Turkey's Finance Minister Naci Agbal said on Friday.
The payment, which will be divided among the 10 families, comes some nine months after Israel agreed to pay the families of those killed. Israel had already offered apologies for the raid, one of Ankara's conditions for rapprochement,
"Compensation has been paid to the families of those who lost their lives during the Mavi Marmara attack," said Agbal.
Relations between Israel and Turkey broke down in 2010 when Turkish pro-Palestinian activists were killed by Israeli commandos enforcing a naval blockade of the Gaza Strip.
The soldiers raided the Mavi Marmara whch was leading a flotilla towards Gaza in Palestine.
In June 2016 however, the two countries said they would normalise relations, a rapprochement driven by the prospect of lucrative Mediterranean gas deals as well as mutual fears over security risks in the Middle East.
Turkish President Recep Tayyip Erdogan named a new ambassador to Israel in November last year, reciprocating a move by the Israelis, in a move towards restoring diplomatic ties between the once-close allies.