Spain's football federation imposed the ban at the end of October, arguing the former France midfielder did not have the right licence to coach in Spain.
Real appealed and the three-time World Footballer of the Year was allowed to continue coaching while the Court of Arbitration for Sport considered the case.
Zidane's assistant Santiago Sanchez, who was also sanctioned by the Spanish federation, the RFEF, was also cleared to continue his duties while the case was considered.
"The appeal was accepted. This annuls the resolution from the appeals committee of the RFEF," a spokesman for the court of Arbitration for Sport told AFP.
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Real insisted that Zidane has the proper qualifications to coach their reserve team, although he needs a UEFA 'A' licence level three badge to do so and he only holds a level two.
Spanish coaching school Cenafe complained to the Spanish federation, alleging that Real were using Sanchez's name on teamsheets as coach to get around regulations preventing Zidane from running the reserve team, Real Madrid Castilla.