Fritzl is currently being held at Stein prison but will be moved as long as the public prosecutor’s office does not file an appeal against the decision in the next 14 days.
His eventual release would stipulate that he attends psychotherapy sessions every three months, and he will be on probation in regular prison for 10 years, court documents said.
“Any future application for conditional release from the normal prison can only be submitted if there is a significant change in the relevant circumstances,” said Judge Ferdinand Schuster.
Fritzl’s lawyer, Astrid Wagner, told CNN that “he is very happy about how it turned out and that a first step in the right direction has been taken.”
“I am confident and absolutely convinced that my client will be granted a permanent release in the foreseeable future,” added Wagner.
Last week it was announced that a psychiatric examination had found that Fritzl is suffering from dementia, and that Wagner was trying to get the 88-year-old moved to a nursing home to receive adequate care.
In 2009, a jury in Austria found Fritzl guilty of raping and imprisoning his daughter for over two decades, sentencing him to life in prison.
The trial shocked the world with details of how he had confined his daughter in a specially designed cellar in 1984, when she was 18, and kept her there for 24 years while repeatedly sexually assaulting her and fathering her seven children.
Fritzl kept four of those children captive in the cellar with his daughter, while allowing the others to live upstairs with his wife.
Meanwhile, he told his family that his daughter had run away to join a cult and explained the sudden appearance of the three children by claiming she had returned and dropped them off.
The case only came to light in April 2008, when one of the children became seriously ill and ended up in hospital.