Eliza Szonert, embroiled in a custody dispute with businessman Ashley Crick, took her son with the aid of a child recovery agency on 10 December.
Police detained her last week after she refused to reveal the child's location.
She can now leave with her son and without charge after adhering to police requests to take him to a doctor.
"She can leave Malaysia for home with her son. We have investigated the case and the deputy public prosecutor has decided that there will be no prosecution against her," Kuala Lumpur police chief Tajuddin Mohamad Isa said.
The case sparked a controversy after video of her taking the child in a Kuala Lumpur restaurant was circulated.
Mr Crick, who works for a Malaysia-based video streaming service, is reportedly back in Australia to seek custody of the child through the Australian court system.
"Thank you everyone for your love, support and assistance during this exhausting ordeal. More than anything I'm just looking forward to getting home and spending time with my son again," Ms Szonert said in a Facebook post.
Child Recovery Australia, the controversial group that helped Ms Szonert, said on its Facebook page that her return signalled "another successful recovery".
Two men from Child Recovery Australia accompanied Ms Szonert to the restaurant where the child was taken and spoke to Mr Crick.
Ms Szonert said that Mr Crick had taken away her and her son's passports after a disagreement.
The actress played troublemaker Danni Stark in Neighbours, appearing in the soap between 1993 and 1996, and she also had a role in the 2000 Australian movie The Dish.
A former Neighbours actress, held in Malaysia after snatching her child from her estranged partner at a restaurant, can return to Australia, officials say