The decision was taken in the early hours of Saturday following a lengthy meeting of the Cameroon Football Federation, who had been asked to reconsider the controversial sanction by Cameroon President Paul Biya, officials told Reuters.
Eto'o was punished for leading a strike in November when the Cameroon team refused to play a friendly in Algeria because they had not been paid promised bonuses.
The teams played two friendlies in three days in Morocco but then refused to travel to Algeria in protest at not receiving the funds.
Eto'o's punishment had been widely condemned in Cameroon, where the former Barcelona and Inter Milan striker enjoys widespread popularity because of his performances at both club level and with the Indomitable Lions.
Cameroon's federation has since agreed to pay $500,000 to the Algerian federation in damages after the game, for which more than 40,000 tickets were sold, had to be called off.
Vice captain Enoh Eyong also had his ban reduced and he will miss just one game when Cameroon begin their bid to qualify for the 2013 Africa Cup of Nations finals in February.
A $2,000 fine on Tottenham Hotspur defender Benoit Assou-Ekotto for failing to show up for the two matches in Morocco was rescinded.
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