FIFA had banned local oil tycoon Arifin Panigoro, who launched the breakaway Indonesian Premier League (LPI), and Army Chief of Staff George Toisutta and warned the PSSI electoral appeal committee last week they faced "severe sanctions" if the duo were reinstated.
However, appeal committee chairman Ahmad Riyadh said new evidence had come to light and that the pair would be allowed to stand in the May 20 election.
"Arifin and George have never broken FIFA's or PSSI's statutes," Riyadh told local Indonesian media.
"We understand that this decision will not please all parties, but this is our final decision and we believe that this is the right decision so Indonesian football can move forward into a better era."
"WRONG FACTS"
FIFA had also banned Nirwan Bakrie and incumbent Nurdin Halid, whose administration was to blame for the ban on Panigoro and Toisutta, Riyadh said.
"We found several (pieces of) evidence that previous PSSI officials were manipulating facts about George and Arifin," Riyadh said.
"Those officials sent the wrong facts about them to FIFA, which of course influenced FIFA's decision to ban them from the election."
In a letter seen by Reuters last week, FIFA stated that the PSSI electoral appeal committee was not allowed to process the appeal on the eligibility for the PSSI presidency as the case has already been decided and the penalty for not abiding by the decision could be a suspension.
The Jakarta Globe quoted Halim Mahfudz, a spokesman for Panigoro and Toisutta, saying the pair would take their case to sport's highest tribunal, the Court of Arbitration for Sport (CAS), should FIFA prevent them from being able to stand.
"FIFA statutes say only a criminal can't run the (PSSI) and George and Arifin are not criminals," Mahfudz told the paper.
The developments and the possibility of a CAS hearing are likely to delay the elections with a suspension jeopardising Indonesia's participation in 2014 World Cup qualifying.
Indonesia, ranked 130th by FIFA, have been drawn to play Turkmenistan in the second round of Asian qualifying, with the first leg to take place on July 23 in Ashgabat before the return in Jakarta five days later.
