Israeli police had closed Sari Nusseibeh's offices two weeks ago following allegations by Israel's Public Security Minister, Uzi Landau, that he had used the office to campaign for the Authority.
Such an act is banned in east Jerusalem under the 1993 Oslo peace accords.
But the order was revoked on Monday after Mr Nusseibeh, chief representative of the Palestinians in Jerusalem, gave a written statement reaffirming that he would not take part in politics nor receive any money from the Authority.
Protests
Onlookers cheered and threw sweets in the air as Israeli police arrived at the university with keys to open the door, the Associated Press reported.
But office director Dimitri Diliani said that it would be several days before the office could be restored to working order, as Israeli officials had taken vital documents and computer disks.
The decision to close the offices of Mr Nusseibeh - a high profile Palestinian moderate - drew criticism from the US, which warned Israel that the move would alienate potential reformists within the Palestinian regime.
It also led to protests by Israeli and Palestinian peace activists, who staged a sit-in outside the building in protest against the closure.
Mr Nusseibeh has been an outspoken critic of Palestinian suicide bombers and has advocated compromise on contentious issues such as Palestinian refugees looking to return to Israel.
He said that his office had never been part of the Palestinian Authority, but that his signing of the agreement would not prevent him from performing work for organisation.
"I signed an affirmation that this university is a non-governmental organisation, an academic institution," he said.
"We have no intention of being part of the Palestinian Authority or of being a representation office of the Palestinian Authority. This is our position, it's always been like this in the past."