The USK will now assign age ratings to games that depict symbols of "unconstitutional organizations" on a case-by-case basis, as long as they serve an artistic or scientific goal or if they depict current or historical events.
The lifting of the ban on Nazi symbols, if used in a "socially adequate" way, was announced by a German industry group on Thursday.
"Computer and video games have been recognized as a cultural medium for many years now, and this latest decision consistently cements that recognition in terms of the use of unconstitutional symbols as well", he commented.
Because movies are deemed works of art, they are exempt from the ban, similar to material used in research, historical or scientific purposes.
The alterations to the game had sparked uproar in the gaming community, which said games should be treated like films.
All computer games sold on storage media in Germany have to be checked by the USK, which issues age ratings.
In the wake of that ruling, game publishers have had to make significant edits to numerous games for release in Germany, sometimes to a ridiculous degree.
Most prominently, the focus has previously been on disallowing the use of symbols that echo Germany's dark past during the reign of national socialism, but games that feature visuals of symbols such as the swastika will now be simply subject to the same level of rating as others of its kind before being approved for the public.
For instance, in the German versions of the famous Wolfenstein series, images of Adolf Hitler had to be altered to remove his mustache and the swastikas replaced with a triangular symbol.
The 1998 decision was recently challenged in a case surrounding Web-based game Bundesfighter II Turbo, a politically themed satirical fighting game.
The USK, which was given responsibility for policing content by Germany's youth protection services, also said that games themed on the Nazi era would be subject to an age limit.