The ruling came after a Cook County judge sentenced Smollett last week to immediately begin serving 150 days for his conviction on five felony counts of disorderly conduct for lying to police.
The appeals court said Smollett could be released after posting a personal recognisance bond of $US150,000 ($A207,300).
Smollett's lawyers had argued that he would have completed the sentence by the time the appeal process was completed and that Smollett could be in danger of physical harm if he remained locked up in Cook County Jail.
The court's decision marks the latest chapter in a strange story that began in January 2019 when Smollett, who is Black and gay, reported to Chicago police that he was the victim of a racist and homophobic attack by two men wearing ski masks.
The manhunt for the attackers soon turned into an investigation of Smollett himself and his arrest on charges that he had orchestrated the attack and lied to police about it.
The investigation revealed Smollett paid two men he knew from work on the TV show Empire to stage the attack.
A jury convicted Smollett in December on five felony counts of disorderly conduct — the charge filed when a person lies to police. He was acquitted on a sixth count. Judge James Linn sentenced Smollett last week to 150 days in jail, but with good behaviour he can be released in as little as 75.
Smollett maintained his innocence during the trial.
During sentencing he shouted at the judge that he was innocent, warning the judge that he was not suicidal and if he died in custody it was somebody else, and not him, who would have taken his life.
