UEFA said it had also lifted "a number of restrictions" on transfer activity and wages which had been placed on the clubs as part of settlement deals one year ago. Restrictions on squad sizes for European competition have also been eased.
Friday’s decision was taken by UEFA's club financial control board after both clubs "reached certain targets towards break-even compliance", UEFA added in a statement.
UEFA said that, in both cases, the clubs remained "under strict monitoring and have still to meet break-even targets and are therefore subject to some limitations in 2016."
UEFA approved FFP in 2010 to prevent rich owners from pumping unlimited amounts of cash into clubs. In principle, clubs cannot spent more than they generate, although there are exceptions.
Under the agreement reached with UEFA last year, PSG had agreed that their operating loss for the 2015 financial year would not exceed 30 million euros ($33.29 million) and that it would break even in 2016.
Manchester City agreed that their operation losses would not exceed 20 million euros for the 2014 financial year and 10 million euros for 2015.
Both clubs had accepted that they could not increase their wage bills during the 2015 and 2016 financial years and had agreed to significantly limit transfer spending for the 2014-15 and 2015-16 seasons.
Both were handed a 60 million-euros fine, to be withheld from European competition prize money, of which 40 million would be struck off if they met the targets set by UEFA.
($1 = 0.9011 euros)
(Reporting by Brian Homewood, editing by Ed Osmond)
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