The Court of Arbitration for Sport upheld the Estonian skier's appeal against the ban imposed by the International Ski Federation, citing "procedural flaws" that could have caused false positive test results.
"The panel noted that there were many factors in this case which tend to indicate that Andrus Veerpalu did in fact himself administer exogenous HGH," the court said in a statement.
The court's three arbitrators also stated their belief in the value of the test for HGH - which has traditionally been one of the hardest substances to detect in the fight against doping.
However, the court said FIS "failed to meet the applicable standard of proof" which was essential to "avoid the risk of having 'false positive' tests."
FIS, the ski federation, said Veerpalu tested positive for HGH in Estonia in January 2011 while preparing for the world championships the following month.
The 42-year-old skier won gold medals in the classical 15-kilometer races at the 2002 and 2006 Olympics, and was also a two-time world champion.
The FIS sanction lifted Tuesday was intended to apply until Feb. 23, 2014 - the final day of the Sochi Winter Olympics.
Veerpalu announced his retirement from competition within weeks of the positive test, and it was not clear if he plans a comeback. His victory clears him to work in the sport as a coach or official, even if he does not plan to race again.
Despite ruling against skiing's governing body, the CAS panel endorsed the HGH test, which was performed on Veerpalu's sample by a WADA-accredited laboratory in Cologne, Germany.