PP Pande was arrested in 2013.
Four days after a special court of the Central Bureau of Investigation or CBI granted him bail in the Ishrat Jahan encounter case, the Gujarat government has revoked the suspension of police officer PP Pande.
Mr Pande has been reinstated as the additional Director General of Police in charge of law and order, in Gujarat, said sources.
Mr Pande was arrested in August 2013 for allegedly conspiring with other accused officials to carry out the encounter of Ishrat Jahan in 2004. Mr Pande was head of the Ahmedabad Crime Branch when the encounter took place.
DG Vanzara, one of Gujarat's most controversial police officers, was also granted bail in the same case by the court in Ahmedabad on February 5.
The CBI had vehemently opposed the bail pleas of these officers, and stated that Mr Pande and Mr Vanzara had actively taken part in the encounter; lawyers of the police officers had argued that they had been falsely implicated in the case.
In 2004, Ishrat Jahan, a 19-year-old, and three other men were shot dead by officers who claimed that they were involved in a plot to kill Narendra Modi, who was Chief Minister of Gujarat at the time.
With Mr Pande's reinstatement, most of the policemen accused of being allegedly involved in fake encounter cases are back in the state's police force. Those who have been reinstated so far include Abhay Chudasama and Raj Kumar Pandiyan, accused in the Sohrabbudin fake encounter case, and GL Singhal, another accused in the Ishrat Jahan encounter case.