The department was subject to a Serious Case Review after the death of five-year-old Tyler Whelan, murdered by his mother's former partner in March 2011.
Ofsted found no children "inadequately protected or at risk of significant harm" and praised "rapid improvements".
Service director Sue Westcott said there was "no room for complacency".
The Conservative-led council had been subject to an Ofsted "notice to improve" since June 2010, following an inspection in March of that year.
A re-inspection of children's services in August 2011 again found the overall effectiveness of the department to be inadequate.
The review of the Tyler Whelan case, published in May last year, found it was one of many agencies that missed "numerous opportunities" for "more rigorous and incisive" interventions.
Elvis Lee, 34, kicked and bit Tyler Whelan, who died in hospital after collapsing at his home in Sheepwalk, Paston, near Peterborough.
The new rating of adequate by the education standards authority means the service "meets minimum requirements".
It follows an eight-day unannounced inspection of the department by five Ofsted officers in January.
"They found the lessons of the past had been taken very seriously and [the council] had invested considerably in additional social workers," Mrs Westcott said.
Investing in more staff meant the use of agency workers had been reduced and social workers' caseloads were now "more manageable", she added.
Nick Sandford, leader of the Liberal Democrat group on the city council, said: "There were some really important issues surrounding child safety but the council has recognised those significant failures and addressed them."
He described the improvements as "encouraging" but questioned whether the council could maintain the required level of investment.
Earlier this week city councillors agreed ??17m worth of cuts, including to children's play centres and adult social care services.
Mrs Westcott said: "The money that's been invested [in children's services] has been absolutely worthwhile."
Services are rated by Ofsted as inadequate, adequate, good or outstanding.
Children's services at Peterborough City Council have been rated as adequate by Ofsted, after two consecutive years of "poor" ratings.