Two-year-old Hank was removed by dog wardens last month and taken for testing.
A court in Belfast heard he had been assessed by an expert to be a pit bull terrier-type.
However, it has been recommended that he be placed on the council's exemption register.
Hank will undergo behavioural training and will also be kept on a lead and muzzled while in public.
As the the exemption order was signed, one of Hank's owners - Joanne Meadows - broke down in tears in the public gallery while supporters applauded.
"We knew what was happening today but it was just such a relief to know that it actually was happening," she said.
"Until the judge said the words, we were just feared in case something changed, so it means so much.
"I just can't get over that I'm going to be able to see him later on today."
Miss Meadows said she did worry that this day may never come.
"Even when we were told that was the decision on Thursday, I just didn't want to believe it until it actually happened because I just didn't want to get my hopes up because I just missed him so much," she said.
A solicitor for the family thanked all those who helped with the campaign to free Hank, which attracted worldwide attention and support from celebrities including presenter Dermot O'Leary, boxer Carl Frampton and celebrity dog trainer Victoria Stillwell.
An online petition to have Hank returned was signed by more than 280,000 people.
Under Article 25(a) of the Dogs (Northern Ireland) Order 1983 some types of dog, including pit bulls, are deemed inherently dangerous and can be destroyed.
Hank is the 12th dog to be placed on the exemption register since 2011.
The couple have said their fight is not over as they believe the current legislation is fundamentally flawed and want it overhauled.
They are planning a rally at Stormont next Sunday and said they  simply could not just walk away and leave other dog owners in the same situation.
Hank's other owner, Leonard Collins said they did not think he would have been coming home so soon without the public support they had been offered.
"Belfast City Council, when the pressure was put on, they expedited the process," he said.
"We've spoken to people going through similar situations in England and here and it seemed to be that once this picked up public pressure, they wanted it finished as soon as possible."
"We'd just like to thank everyone across the world, never mind Northern Ireland, Belfast, the media, friends, family, just everybody," Miss Meadows said.
A dog seized by Belfast City Council for "looking like a pit bull" has been reunited with his owners.