The US Food and Drug Administration (FDA) announced the decision after considering the recommendations made by a 26-member panel of experts on June 6.
"Our actions today reflect the most current scientific knowledge about the risks and benefits of this drug," said Janet Woodcock, head of the FDA's Center for Drug Evaluation and Research.
"Given these new results, our level of concern is considerably reduced; thus we are requiring the removal of certain prescribing restrictions," she added.
The FDA move will include the removal of labeling which warns of a possible cardiovascular risk through taking the drug.
As soon as the changes are finalized the use of rosiglitazone (Avandia) will no longer be limited to use by certain patients, the FDA statement said.
The drug's new indication will state that it may be used in conjunction with diet and exercise to improve control of blood sugar levels in patients with type 2 diabetes, similar to other diabetes drugs on the market.
The FDA slapped restrictions on Avandia in 2010, hitting sales of the drug manufactured by British firm GlaxoSmithKline.
Sales of Avandia started to slide in 2007 after researchers raised the possibility of a link between the drug and an increased cardiovascular risk based on clinical trial analyzes.
GlaxoSmithKline had insisted the drug -- at one time the biggest-selling drug in the world with annual sales worth $3 billion -- was completely safe.