The Competition and Markets Authority (CMA) said it received thousands of complaints from people who were not receiving refunds for their cancelled holidays within 14 days, which is the limit set by consumer protection law.
The CMA said the travel company engaged constructively throughout the investigation and the vast majority of people have already received their refunds or rebooked.
Following the delays, TUI will have to report regularly to the CMA over the coming year on the time it has taken to refund customers.
Last month, the Anglo-German tour operator posted a €2.3bn loss in the first nine months of its financial year to June 30.
Shares dipped 1% to 335.4p on Wednesday morning.