As part of the altered bail conditions, the four men must surrender their passports, not try to obtain travel documents and must regularly report to police.
Dotcom was delighted with the ruling and said he was looking forward to telling his wife and children the news.
"I'm really happy about the decision and I'm going to comply with everything the court is asking.
"I will be able to move back with my family into our home - the kids and my wife are always asking. I looking forward to that,'' he said.
Dotcom, his wife Mona and their children have been living in a neighbouring property which he owns but will now be able to move back into the sprawling multimillion-dollar rented mansion north of Auckland.
The Chrisco mansion had been assessed as unsuitable as a bail address because it did not allow proper electronic monitoring but Dotcom can move back in with the removal of his electronic monitoring bail condition.
Today's decision followed a similar bail hearing conditions last week, which allowed Dotcom to visit a recording studio to make his album.
At court today, Dotcom's lawyer Paul Davison QC said his client had showed "exemplary compliance'' in adhering to court orders and with the passing of time, the flight risk had diminished.
However, the Crown resisted the relaxing of bail conditions, saying the flight risk still existed and there had been little change in the circumstances of the men, who had been under constant surveillance.
"There has been a very limited opportunity for a trust situation for all four of the respondents,'' said crown counsel Anne Toohey.
The men were arrested after being allegedly linked to a US investigation into international copyright infringement and money laundering, sparking a police raid of the Coatsville mansion.
Since then, Dotcom and his co-accused have effectively been under house arrest.
