The former England skipper and 2003 World Cup winner was at the centre of a controversial drunken night out in Queenstown in which CCTV pictures showing him with a woman in a bar were published in national newspapers.
Tindall, who is married to the Queen's grand-daughter Zara Phillips, initially denied claims he had gone to a second bar with the woman but was later forced to backtrack on that statement.
The Gloucester centre was punished for the incident last month but has now had his fine reduced to £15,000 and has been reinstated into the senior squad after the Rugby Football Union's acting CEO Martyn Thomas accepted their were mitigating circumstances behind Tindall's behaviour.
"We accept that there were mitigating factors which do not appear to have been taken into account to the extent that they might otherwise have been," said Thomas of the original decision made by elite rugby director Rob Andrew and legal and governance director Karena Vleck.
"These include; i. Mike did not intentionally mislead the RFU team management when he stated that he could not remember where he was on the night of September 11, and that he was relying on other people's versions of events which were relayed to him.
"ii. That there was no evidence of any suggestion of sexual impropriety of any nature with the woman in question and we accept the fact that she is a family friend who he has known for a long time.
"iii. That Mike expressed deep regret during the appeal meeting about his behaviour and that he had apologised to Martin Johnson and the team for the events which unfolded as a consequence.
"iv. That there was no evidence that Mike had been involved in any incidences in the past which could contribute as aggravating factors."
But while Thomas has reduced the sanctions imposed on Tindall, he has made it clear that his actions fell below those acceptable from a England player.
And although Tindall has been reinstated to the EPS, there is no guarantee that he will be selected again when the squad is renamed on New Year's Day.
"It is important to stress that we believe Mike's behaviour fell way below that to be expected of somebody of his calibre and experience," added Thomas.
"He exposed himself to a very compromising position and exposed the rest of the team to damaging publicity.
"We are aware that the EPS Squad will be reviewed on January 1, 2012 and wish to make it clear that this decision does not prevent those deciding the composition of the EPS Squad from taking into account this incident when making that decision."