The Black Sabbath star is hoping to be released from hospital later this week and is reported to be on the mend.
His wife Sharon and their two children Jack and Kelly, along with other relatives, have been trying to keep his spirits up following the last three days.
'This sparked a lot of panic among those closest to him, but doctors reassured everyone he was in the best possible hands.
'Ozzy's a fighter, and is getting better day by day.
"The worst is over, he smiles again and can not wait to return to the stage", said the source, as quoted by The Sun.
Osbourne has spent almost two weeks in the hospital due to illness.
Now, the British press is reporting that the seriousness of Osbourne's illness has led to him being transferred to intensive care.
Osbourne, 70, was forced to cancel his European tour last week because of serious flu and now The Prince of Darkness has suffered further complications.
He has been forced to postpone his United Kingdom and European tour as a result of the illness.
In a statement, Osbourne said: 'It just seems that since October everything I touch has turned to s***'.
"First the staph infection in my thumb and now coming down with the flu and bronchitis".
Addressing his fan, he continued: "I want to apologise to all of my fans who have been so loyal over the years, my band, my crew and to Judas Priest for letting you all down".
"However, I promise the tour with Judas Priest will be completed".
Ozzy promised his tour was being rescheduled and would start again in September. Again, I apologize to everyone. "God Bless. Love you all, Ozzy".
In a post on Twitter, Sharon, 66, wrote: "As some of you may have heard, Ozzy was admitted to hospital following some complications from the flu".
Pneumonia is an infection of the air sacs in one or both lungs. "A variety of organisms, including bacteria, viruses and fungi, can cause pneumonia", says the Mayo Clinic's website.
"For some older adults and people with heart failure or chronic lung problems, pneumonia can quickly become a life-threatening condition", the Mayo Clinic adds.