The so-called bumping rate for the first half of the year is now the lowest it has been since 1995, the US Department of Transportation says.
The decline comes after widespread outcry over viral videos of passenger ejections earlier this year.
The backlash led airline leaders to pledge improvement.
Overall, more than 213,000 people had to take different flights because of overbooking in the first six months of the year, down from 2016 despite an uptick in total travellers, according to the report.
That figure includes flyers who agreed to give up their seats in exchange for compensation and people bumped involuntarily, whether they received compensation or not.
Why do airlines overbook?
The improvement was driven by a fall in passengers forced off their flight involuntarily, a group that is a much smaller subset of the total - 17,330 people in the first half of the year.
About one in every 19,100 passengers was denied boarding involuntarily in the first six months of the year, compared to one in every 16,000 in 2016, according to the report. That's the lowest rate since 1995.
Delta Air Lines had the lowest rate of involuntary bumping of the 12 airlines tracked in the report, while budget carrier Spirit Airlines had the worst record.
There were more than 332 million travellers in the first half of the year, up almost 3% from 2016.
Scrutiny of overbooking and involuntary bumping increased after Dr David Dao was injured while being physically removed from a United Airlines flight in April. He later settled with the airline.
After video of his incident went viral, experiences on other airlines also drew attention.
US politicians called airline executives to a hearing, warning they would consider regulatory action if the companies did not improve.
Some airlines changed their policies after the incidents, for example, by boosting the amount of money staff can offer to persuade people to give up their seats.
US airlines have reported a sharp downturn in the share of passengers they force on to other flights because of overbooking.