US District Judge Paul Friedman said Hinckley no longer posed a danger to himself or others and could be released from a government psychiatric hospital in Washington.
Hinckley, 61, "is permitted to reside full-time in Williamsburg, Virginia, on convalescent leave, which shall begin no sooner than Aug 5, 2016," Friedman said in a 14-page order.
Former US first lady Nancy Reagan dies at 94
His mother lives in Williamsburg, about 130 miles (210 km) south of Washington. The order includes a requirement that Hinckley meet with his psychiatrist in Washington at least once a month and notify the Secret Service when he travels for the appointment.
A jury found Hinckley not guilty by reason of insanity for the attack on Reagan, which also badly wounded presidential press secretary James Brady.
Hinckley carried out the attack in a bid to impress actress Jodie Foster, with whom he was obsessed.
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