City were handed a two-year ban from Uefa's competition and a £24.9million fine in February after being found guilty of "serious breaches" of club licensing and Financial Fair Play regulations.
The club swiftly signalled its intention to appeal amid speculation that the punishment could cost it some of its biggest names as well as manager Pep Guardiola, and the Switzerland-based Court of Arbitration for Sport delivered its verdict at 9.30am BST.
City's ban was overturned in its entirety, while the fine was reduced by two thirds to £9.87m.
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