Deepan Budlakoti, 25, still represents a flight risk and a danger to society, however, said Immigration and Refugee Board of Canada member Francois Milo.
"The danger ground for detention has lessened through the passage of time and because of Mr. Budlakoti's good conduct, compared to that of his troubled youth and early adulthood," Milo said in Montreal.
Budlakoti will now have to report to the Canada Border Services Agency only every six months instead of every three.
And Milo said the condition that Budlakoti must keep the peace is too vague. It was changed so the Ottawa native must now report to border officials within 48 hours of any arrest, accusation or conviction.
Budlakoti was born in Canada to Indian nationals working for Indian High Commission officials and was not given automatic citizenship.
He became a permanent resident in 1992 but was stripped of that status after he was convicted of trafficking weapons and drugs. He had also been convicted earlier of two counts of breaking and entering.
Canada has an active deportation order against him but cannot make him leave because he has nowhere to go. India has refused to allow him to enter the country because it does not recognize him as a citizen, according to court documents.
In 2011, the Immigration and Refugee Board of Canada rejected Budlakoti's request to be declared a Canadian citizen.
He applied to have that decision reviewed by the Federal Court of Canada but lost at that level and then at the Federal Court of Appeal in May 2015.
The appeals court ruled that Budlakoti is not legally a "stateless person,'' as he claims, because he has not officially applied for citizenship in either Canada or India.
Budlakoti says he has begun proceedings to have the Supreme Court hear his challenge of the appeals court ruling.
Since being freed from detention in 2013, Budlakoti has received support from human rights organizations, public-sector unions and members of the public who say his legal limbo is unfair and violates his freedoms.
He collects donations from the public and unions and says his legal team either works for free or at reduced rates.
Budlakoti says he made mistakes when he was younger but is rehabilitated.
"I was a ward of the state when I was 14," he said in an interview. "I was going from group home to group home. I made a mistake when I was younger but I paid my debt to society and I'm trying to move on with my life."