Pope John Paul II's health is improving and he is eating normally, a Vatican spokesman has told reporters.
Catholics around the world are praying for the Pope
Joaquin Navarro-Valls said the pontiff hoped to give his regular live address on Sunday from hospital but a decision would not be taken until the day.
The 84-year-old pope was taken to Rome's Gemelli hospital on Tuesday after being struck by influenza.
The Vatican said on Thursday he was likely to stay for a week to recover from an acute respiratory infection.
"The state of health of the Holy Father has improved, " said Mr Navarro-Valls on Friday, reading from a brief Vatican medical bulletin.
He said tests confirmed that the Pope's health had stabilised, and there had been a "favourable evolution" of the breathing troubles he suffered at the start of the week.
The Pope is believed to have suffered a laryngo-spasm, a closure of the larynx that blocks the passage of air to the lungs.
There were concerns that he could develop pneumonia, although his heart and lungs were said to be normal.
The Vatican has been keen to stress that this is not a life-threatening illness.
The Pope suffers from Parkinson's disease and painful joint conditions.
Vatican sources say a contingency plan was made for the Pope to be taken to hospital if he fell victim to the current flu epidemic sweeping Italy. A set of rooms is always reserved for him on the 10th floor.
The Pope was forced to cancel all engagements for several days after coming down with flu on Sunday.
Mr Navarro-Valls said no decision had yet been taken about the Pope's regular Sunday Angelus address to pilgrims.
He said only: "It's very important to him and something he does not want to miss."
Catholics around the world have been attending special church services to pray for the Pope's recovery.