In a statement on the club's website on Tuesday, chief executive Peter Storrie said: "We are delighted the transfer embargo for player registrations has been lifted by the Premier League.
"(Manager) Avram Grant will now be trying to bring in players to strengthen the squad in loan and free deals."
The embargo was lifted after Italian club Udinese came to an agreement with bottom of the table Portsmouth over money owed for former player Sulley Muntari, now with Inter Milan.
In a statement the Premier League said: "The board has taken this action as Portsmouth FC has no outstanding debts to football clubs as of this date".
Tuesday's development represents some long-awaited good news for the financially-troubled south coast club who have battled with problems on and off the pitch throughout the season.
They are facing a winding-up order in the High Court on Feb. 10 following a petition issued by the Government's Revenue and Customs office and could become the first Premier League club to go into administration.
Portsmouth have also failed to pay their players on time three times this season and the Premier League diverted most of their recent seven million pounds television income to clubs they still owed transfer fees.
