Elaine Worsley painted it at her Stevenage Borough Council-owned house in July, inspired by members of her family killed in both world wars.
After a complaint, she was told she should have asked for permission and it might have to be removed.
But, after she applied for retrospective planning permission, the council has said it can stay.
Miss Worsley said she was "incensed" when the council said someone had complained and she must apply for the permission.
She maintained the fence herself, but added the mural after deciding the wood preservative she had used looked drab.
Miss Worsley said the mural on her York Road fence was not visible from the main road.
In her application letter to the council, she said: "It is certainly a lot nicer than graffiti sprayed all over the town and the derelict house next door."
Miss Worsley said she painted it to commemorate relatives and to honour ex-service personnel she worked with in her role as a carer.
"I have never had a single negative comment since painting the mural," she said.
A council spokesman said: "As part of our tenancy agreement, residents are asked to seek permission prior to modifying their properties."
She had been told it could take six weeks to reach a decision, however, after discussing her story on BBC Three Counties Radio, Miss Worsley was told the mural could stay.
The council said: "Whilst we were not consulted on this occasion, we have given the tenant permission to keep the fence panels as they are."
A woman who painted an armed forces memorial mural on her council house fence has been told it can remain.