No, a stipulation of discontinuance alone does not vacate a prior entered judgment. The effects of a stipulation of discontinuance are governed by CPLR 3218(c), and can only adjudicate the merits of an action if there is a prior discontinuance for the same cause of action.
However, by your question, I cannot tell if an actual money judgment was entered. The Court Clerk can help you to determine that. If no judgment was entered, then a stipulation of discontinuance may be sufficient.
If a judgment was entered, it needs to be dealt with. If they are willing to stipulation to vacate the judgment, or file a satisfaction of judgment, those are separate issues that must be separately and expressly agreed upon.
If there is a judgment entered against you, I would suggest that you hire a litigator, even for one hour, to negotiate the stipulation and see that your rights are protected.