Kuwait's national Olympic committee (KOC) has been banned since October, 2015 after the government was accused of interference with a new sports law.
As a result, Kuwaiti athletes had to compete under the Olympic flag at the Rio de Janeiro Games in 2016 and they have no access to IOC funds.
"In the interest of Kuwaiti athletes and as a gesture of goodwill to recognise the progress accomplished, the IOC Executive Board has decided to provisionally lift the suspension of the KOC with immediate effect," the IOC said in a statement.
The Asian Games in Indonesia start on Saturday.
The IOC said the reasons for the suspension remained valid, "in particular the need to protect the Olympic movement in Kuwait from undue government interference".
But it noted progress in the discussions with Kuwait and the agreement of a road map for fresh elections of all sports organisations in Kuwait and potential amendments to the controversial sports law.
Talks in the past years had failed to yield a result and Kuwait in 2016 repeatedly sued the IOC unsuccessfully for 1 billion dollars as compensation for the ban.
Kuwait said at the time the ban was unjustifiable and unfair and the IOC had not conducted "an appropriate investigation". Kuwait had also been suspended in 2010 over a similar dispute but was reinstated before the 2012 London Olympics.
The country has had more than 15 national sports bodies suspended in the past years, including its football federation.
(Reporting by Karolos Grohmann, editing by Ed Osmond)
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