Gregor Robertson, the mayor of Vancouver, said he would "certainly" not support the restriction through efforts to regulate noise levels.
The ban was overturned during a visit to the city by Fiona Hyslop, the Scottish culture and external affairs secretary.
She said: "I welcome the fact that common sense has prevailed. The mayor has acted decisively and that bagpipes will once again be heard on the streets of Vancouver.
"Mayor Robertson and I both recognise that bagpipes are part of the cultural heritage shared by Scotland and Vancouver."
Mr Robertson, who claims Scottish descent, had initially said an outright ban could be "culturally insensitive".
A statement on his website adds: "The restriction on bagpipes has now been lifted.
"Staff will continue to gather noise level readings, monitor complaints and work with musicians and performers to see how these instruments can be permitted in a way that is acceptable to the public.
"As the mayor has made clear though, council will not support an outright ban on specific instruments and certainly not bagpipes."
Ms Hyslop is in Vancouver for Scotland Week 2012, with ministerial engagements also in New York, Toronto, Calgary, Chicago, San Francisco and Houston.
Video: The Simon Fraser University Pipe Band at the World Pipe Band Championships in Glasgow, 2009 (YouTube).