City captain Kompany wins red card appeal
The Belgian was shown a straight red card by referee Mike Dean in the 75th minute for what was deemed a two-footed lunge on Jack Wilshire.
"We can officially confirm that Vincent Kompany's red card against Arsenal has been overturned," City said on their Twitter feed on Tuesday.
The FA confirmed the decision made by an Independent Regulatory Commission.
"Kompany's three-match suspension has been withdrawn with immediate effect," the governing body said in a statement.
Manchester City manager Roberto Mancini was furious at Kompany's dismissal, describing it as a "big mistake" by Dean and stating that his captain won the ball.
"It's not a red card, it's nothing," Mancini railed after second-placed City won 2-0 at Emirates Stadium to remain seven points behind Premier League leaders Manchester United.
"It was one-footed, not two."
Kompany later tweeted that he had no grudge against Dean, saying he understood the difficulty of the job.
Several former players came out in defence of Kompany but other pundits said the red card was warranted.
The FA has overturned a number of red cards in recent months.