Facing a possible two-year ban requested by the International Tennis Federation, the Court of Arbitration for Sport sided with the Croatian player.
Cilic tested positive for a banned stimulant in May but claimed he had not intended to ingest it in a glucose tablet bought at a pharmacy.
"The panel determined that the degree of fault committed by the athlete was inferior to that established in the (tribunal) decision," the court said in a statement. "The panel also determined that the sanction imposed was too severe in view of the degree of fault and concluded that it should be reduced to four months."
The 25-year-old Croatian player was cleared to return from midnight Friday.
Cilic's ranking, which has dropped to No. 47, is set for an immediate boost with the return of his points from events including the French Open, Wimbledon and the grass-court Queen's Club event in London, where he was runner-up to Andy Murray.
"Mr. Cilic's results subsequent to the BMW Open (in Munich) will not be disqualified and he is permitted to retain the ranking points and prize money that he won at those events," the ITF said in a statement.
Cilic's case was fast-tracked following an appeal hearing in London last week, with a verdict promised ahead of Friday's draw for the Paris Masters. It is the final regular tour event of the season.
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Cilic tested positive for nikethamide in Munich in May, where he lost in the first round to fellow Croat Ivan Dodig. He challenged his ban at CAS and sought to prove he was not a cheat.
The ITF requested a two-year ban by appealing the verdict of its own independent tribunal.
Cilic's ranking peaked at No. 9 in February 2010, and has dropped from 12th since accepting a provisional suspension in June. That day, he withdrew from his second-round match at Wimbledon citing a knee injury.
Cilic now gets back his prize money and ranking points from his first-round win, and from his run to the third round at Roland Garros.
The court said it would publish its panel's detailed verdict at a later date.
Press; By GRAHAM DUNBAR]
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