A presidential statement said that all ranks and medals denied to Gen Fonseka by the Rajapaksa regime along with his pension have been restored following a pardon granted to him by Sirisena.
"The President has pardoned him under section 34 (2) of the constitution," a spokesman said.
Sri Lanka's only four-star general, 64-year-old Fonseka is now entitled to enjoy all of his former privileges without any legal obstacles, the statement said.
He fell out with the then President Rajapaksa and challenged him in the presidential election of 2010.
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Rajapaksa routed Gen Fonseka with 58 per cent of the vote to win his second term.
Immediately thereafter the army general was arrested for harbouring military deserters.
Later, he was court martialled and jailed for corruption as the Army chief.
While in prison he ran for parliament and got elected.
Gen Fonseka lost his civic rights following his conviction, including the right to vote, and was stripped of his rank. These rights were not restored when President Rajapaksa released him from prison in May 2012.
The general now sits as a member of the National Executive Council of Sirisena which decides on national policies.