Paul Davies, former head of Cwmdare Primary School in Aberdare, successfully appealed against the General Teaching Council for Wales (GTCW) ruling at a hearing in London.
He had been banned in February by the professional conduct committee and prevented from applying for reinstatement for at least two years. But his ban was set aside by Mr Justice Blair, and instead replaced by a seven-month suspension order.
Despite some criticism of Mr Davies, the judge felt the GTCW gave too little weight to the support he had from governors and his local community.
Mr Davies, who was jailed for 15 months last year, had been backed by the NUT. Afterwards he said he was "absolutely delighted" the appeal had succeeded, adding: "I am eternally grateful for all the support I have had."
The crash, caused by Mr Davies in May 2006, left one man, Kelvin Palmer, wheelchair-bound.
His wife Anne Palmer, head of business studies at Treorchy Comprehensive, said: "I can't believe that a head who's done something so serious and gone to prison can go back to teaching. It's absolutely appalling."
Mr Davies will now appeal against his dismissal by the school. The High Court heard that governors felt they had no choice but to dismiss him after taking advice from Rhondda Cynon Taf local education authority.
Anne Hovey, regional officer of the National Association of Head Teachers Cymru, said insufficient weight had been given to Mr Davies's professional record and previously unblemished character.
GTCW chief executive Gary Brace said in a statement: "The right to appeal is enshrined in the Teaching and Higher Education Act 1998. We naturally accept the decision of the High Court."
Rex Phillips, Wales organiser for the NASUWT teachers' union, said: "It may well be there are lessons the GTCW needs to learn about its approach in future."