The reappointment will become official after he is sworn in on Monday in parliament, a spokesman for Lieberman told AFP.
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The Yisrael Beiteinu chairman quit in December 2012 after being charged with fraud and breach of trust for appointing diplomat Zeev Ben Aryeh as ambassador to Latvia after he tipped off Lieberman about a police probe into his affairs.
The prosecution said the appointment was given as a reward and represented a serious conflict of interest, particularly as Lieberman had not made anyone aware of the tip-off.
The three judges at the Jerusalem Magistrates Court on Wednesday agreed that Lieberman had engaged in "inappropriate conduct."
But they did not find this worthy of a criminal conviction and announced his acquittal in a hearing that lasted just a few minutes.
On Sunday, the state attorney's office said in response to a petition that while his actions had been ethically problematic, there were "no legal grounds to prevent MP Lieberman from being appointed as minister."
During his absence from the cabinet, Lieberman still held a position of influence thanks to his role as chairman of the high-profile parliamentary committee on foreign affairs and defense, which he will now have to vacate.
The position of foreign minister was temporarily filled by Netanyahu himself, who reportedly promised Lieberman he would keep the job open for him until the trial was over.
The return of the tough-talking hardliner could further complicate already faltering US-brokered peace talks with the Palestinians.
Critics have long accused Lieberman of racism, especially after he said much of Israel's Arab-populated areas should be joined to a Palestinian state in exchange for Israel keeping its West Bank settlements.
He has also shown open disdain for the moderate Palestinian leader Mahmoud Abbas , calling him a "diplomatic terrorist" and an obstacle to peace.
Commentators warned that Lieberman's re-entry into coalition politics could be a rallying cry for the far right, which opposes making any concessions to the Palestinians.
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