The company is said to have agreed to reforms with the aim of ensuring the products don't contain illegal levels of lead and cadmium.
According to Washington Attorney General Bob Ferguson, the changes come after an investigation by his office revealed a number of items which tested above legal levels for the toxic metals.
Under the terms of the agreement, Amazon will also play $700,000 to help fund future efforts in environmental protection.
In a statement, Ferguson said: "As a parent, when I buy products for my kids, I expect them to be safe.
"All retailers must ensure that their products do not pose a threat to Washington children. If they don't, they will hear from my office."
Once Amazon was informed of the findings of the investigation, the company urged customers to dispose of toxic items - including products decorated with cartoon characters, bright colours and plush exteriors - and gave out more than $200,000 in refunds.
An Amazon spokesperson added: "Customer safety is Amazon's top priority. We work closely with our selling partners to verify that the school supplies and children's jewellery in our store are safe, and drive continuous improvement to our processes to verify the safety of these products.
"We welcome ongoing collaboration with the attorney general and other agencies to promote customer safety."