The Costa del Sol club, who reached the quarter-finals of this season's Champions League, are banned from the next European competition they qualify for over the next four seasons due to delays in payments to creditors - a sanction they are appealing against to the Court of Arbitration for Sport (CAS).
The punishment, imposed on the Qatar-owned club in December, also threatened Malaga with an additional year ban from Europe unless they proved by March that they had settled outstanding payments to other teams, staff and tax authorities.
Wednesday's decision by UEFA's Club Financial Control Body (CFCB) in Nyon said that Malaga had "fulfilled the conditions" imposed and that the second 'conditional' year of their punishment would not now apply.
With two games to go in the Spanish season Malaga are in the Europa League qualifying positions but will be barred unless UEFA's one-year ban is also overturned by CAS.
On Wednesday, UEFA's CFCB said Romania's Rapid Bucharest had not met the conditions imposed on them and would be excluded from competing in the next UEFA competition they qualified for in the next three seasons. They were also fined 100,000 euros.
UEFA said Ukraine's Arsenal Kiev had also failed to meet conditions and were fined a total of 75,000 euros.
Conditional European bans imposed on Hadjuk Split (Croatia), NK Osijek (Croatia), Dynamo Bucharest (Romania) and FK Partizan (Serbia), would not apply, UEFA said.
The punishment meted out to Malaga was seen as proof that UEFA remain serious about enforcing its Financial Fair Play rules that are being phased in to curb overspending.
UEFA's rules mean that all clubs will ultimately have to move towards balancing their books or face exclusion from European competition.