John Hinckley Jr was found not guilty by reason of insanity for the shooting in the 80s
It comes after a federal judge ruled that John Hinckley Jr. was no longer a danger to himself or others.
Reagan was shot while leaving the Washington Hilton Hotel in the US capital in 1981.
Hinckley was found not guilty by reason of insanity for the shooting, which wounded the former US president in the chest.
Three other people were also hurt in the shooting, including presidential press secretary James Brady who was shot in the head.
Brady was paralysed as a result of the wounds and spent the rest of his life in a wheelchair until he died in 2014.
Hinckley said he carried out the attack in an attempt to impress Hollywood actress Jodie Foster, whom he had an obsession with.
The 61-year-old will now be allowed to live with his mother at her home in Williamsburg in Virginia after Judge Paul L Friedman's decision.
For more than a year Hinckley had been allowed to spend 17 days a month at her house, but will live there 'full-time' from August 5th at the earliest.
Several conditions are attached to the order and if he relapses or violates the terms of his release, he could be returned to the government psychiatric hospital at St Elizabeth's in Washington.
Hinckley will also have to meet his psychiatrist in Washington at least once a month and let the Secret Service know when he travels for the appointments.
Over a number of years, doctors have said Hinckley is no longer plagued by the mental illness that drove him to shoot the president on March 30th 1981.