Uber was banned in New Delhi last December after one of its drivers was accused of rape. The authorities rejected Uber's licence application last month and started impounding its vehicles, citing a violation of the ban.
The Delhi High Court said the state government can impose strict conditions to regulate app-based taxi companies such as Uber but it does not favour a complete ban, a lawyer representing the Delhi government said.
"Uber can now ply on Delhi roads," government lawyer Naushad Ahmad Khan told Reuters. "It, however, has been asked to appear before the competent transport authority to pursue the application."
Uber approached a court to challenge the government's decision to reject their licence application after local rival Ola won a similar reprieve.
Uber welcomed the court's directive on Wednesday. "We are committed to working with the government to develop a regulatory framework that encourages innovation," said Gagan Bhatia, the company's general manager in Delhi.
The December incident had led to widespread outrage against online taxi companies that were primarily using mobile technology to connect drivers with passengers, but did not have proper government registrations or safety checks in place.
Uber briefly halted operations in New Delhi in December, but resumed services in January after applying for a radio taxi licence despite a state ban.
© Thomson Reuters 2015