Magistrates in the Tuscan town of Grosseto who are handling the case said Schettino would no longer have to remain confined to his home in Meta di Sorrento near Naples but would have to remain in the town, Msnbc reports.
The judges' ruling said that the period Schettino had spent under house arrest had already had a deterrent effect and he would remain under adequate supervision by authorities.
Schettino faces charges of multiple manslaughter, causing the accident and abandoning ship prematurely. A pre-trial hearing was held in Grosseto, near Florence, in March.
The giant Costa Concordia, carrying more than 4,000 passengers and crew, ran aground off the tiny Tuscan island of Giglio shortly after beginning a cruise of the western Mediterranean.
Schettino is accused of wrecking the 126-ton vessel by bringing it too close to shore where a rocky ledge tore a gash in its side, causing it to keel over and sink.
At least 30 people died in the accident and another two people are still missing and are believed to be dead.
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