A state appeals court that had upheld Omar Bradley's conviction reversed itself this week, the Los Angeles Times reported.
The ruling was based on a California Supreme Court decision last year that public officials must be aware that what they are doing is illegal.
Bradley and two other former Compton officials were found guilty in 2004 of misusing city credit cards, including using the cards for personal expenses and "double-dipping" by getting advances for expenses and then charging them.
In addition to the time he spent in prison and a halfway house, Bradley was barred from holding public office. A former teacher, he also lost his license.
"I've had a very tough go of it, and I'm just thankful that God saw fit to exonerate me," Bradley told the Times.