Regulators say the Indian government has taken measures to address safety concerns previously flagged up.
In January 2014, the US Federal Aviation Administration had downgraded the rating following tests.
Concerns ranged from a lack of training for industry regulators to a shortage of flight inspectors.
That prevented carriers Jet Airways and state-owned Air India from increasing flights, and having to deal with extra surveillance for existing ones.
The upgrade comes at a time when there is more scrutiny on airline safety in the region.
In March, South Korea, Japan and China stopped Thailand-based airlines from flying charters and new routes after safety concerns were brought up during an international audit.
Analysis: Simon Atkinson, Editor, India Business Report
Routes to the US are vitally important to Air India and Jet Airways.
It's home to more than 1.5 million Indian Americans - many of who travel regularly.
And as the Modi and Obama governments promote stronger economic ties - that's lots of business class seats getting filled too.
More broadly - with India's domestic market so competitive (both Air India and Jet are loss-making) - international routes are an opportunity to claw back some of those losses.
So having the option to once again look at adding new destinations, and do deals with more US carriers, can only help that.
US authorities have upgraded India's aviation safety rating, allowing Indian airlines to increase the number of flights they operate to the country.