Technicians from the engine manufacturers Turbomeca and Rolls-Royce have been examining all 11 of the helicopters grounded due to what the Australian military called a "technical incident."
The pilot struggled to land the aircraft, a military statement at the time said.
No one was injured in the incident that took place north of Adelaide near Edinburgh Air Force Base in late April, although no official announcement was made until mid May.
During the announcement that the aircraft are back in service, Rear Adm. Mark Campbell, head of the helicopter systems division at the Defense Materiel Organization, said media reports alleging pilot error as a factor in the engine failure were incorrect.
"There is no suggestion of pilot error as alleged in one United Kingdom report," Campbell said.
Eurocopter Chief Executive Officer Lutz Bertling has also written to Minister for Defense Materiel and Science Greg Combet to directly refute any suggestion that engine damage was caused by improper handling of the aircraft by Australian military pilots.
Campbell also said an inspection regime and preventative measures have been developed to lift the current flying suspension.
"I can confirm flying operations will commence shortly following approval by Defense's Operational Airworthiness Authority," said Campbell.
"Extensive work has been conducted by Rolls-Royce Turbomeca and our industry partners with support from the Defense Science and Technology Organization to identify the cause of the engine failure. We are advised the failure resulted from compressor blade fracture due to contact with the engine casing."
However, the engine failure combined with the workload to address technical issues with the aircraft has put back until mid 2011 the first flight at sea for the navy. The first army capability objective of one deployable MRH90 troop will also be delayed but no date was given by Campbell.
Of the 46 MRH90 helicopters ordered for the Australian navy and army, 11 have been accepted and are being used for training and testing, which contributes to the development of operational capability over the next few years.
Because of the delay in announcing that the helicopters were grounded, there was speculation that the government wanted to avoid embarrassing reports about procurement processes.
In 2008, the Labor government of Kevin Rudd canceled a deal for Seasprite naval helicopters that cost the defense ministry around $1 billion. The Super Seasprite project was canceled after falling seven years behind schedule and almost 50 percent over budget.
Australia is still deciding between EADS and a Lockheed Martin and Sikorsky bid for a $2 billion contract for 25 ship-borne helicopters for its navy.
Last October Australian military chiefs said in a leaked classified document that they were leaning toward the Sikorsky MH-60R Seahawk helicopter over its NH90 rival, EAD's marine version of the MRH90 that was just entering service with the army.
The military claimed that the Sikorsky is a cheaper, risk-free option for Australia instead of the EADS naval frigate helicopter.
EADS's subsidiary Australian Aerospace, which already supplies the army's Tiger helicopters, has argued that purchasing the NH90 would save money by removing the need for multiple training and logistics systems.
Also, EADS says that the 80 percent commonality in avionics and airframe between the NH90 and MRH90 is an economic advantage for the government.
Both EADS and the Lockheed Martin and Sikorsky say they would invest upward of $1 billion in local industry if they secured the deal.
A decision is expected on a naval helicopter in 2011 with deliveries starting in 2014.