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Mother-of-three Denise Giddings, 33, is charged with snatching Karli Hawthorne from the maternity unit at Basildon General Hospital, Essex, last week.
After an hour-long hearing at Basildon Crown Court, a judge overturned a decision by the town's magistrates on Monday to remand her in custody at London's Holloway prison.
In a statement read to open court, Judge Philip Clegg said: "I am satisfied in this case that the public will not be in any danger by Mrs Giddings being out on bail."
She was given bail on condition that she stays at an undisclosed address on a "substantial surety".
The court's decision was made in chambers with no members of the public or press present.
Mrs Giddings, of Langdon Hills, Basildon, is due to return to Basildon Magistrates Court on Monday as part of normal procedure.
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