The 10km (four miles) sq area housing government buildings became off-limits to the public as a security measure in the wake of the 2003 US occupation.
It is the latest in a series of steps by Mr Abadi to ease sectarian tensions and crack down on corruption.
Baghdad has seen weeks of protests over poor services and abuses of power.
Earlier this month, in a rare show of unity, the Iraqi parliament backed Mr Abadi's programme to abolish top government posts and cut spending.
On Friday, the prime minister issued instructions to lift restrictions on the Green Zone. It is not clear when the plan will be implemented.
The compound, in the Karkh district on the west bank of the Tigris, is surrounded by concrete walls and heavily guarded by checkpoints and tanks.
It houses former palaces of Iraqi leader Saddam Hussein and was the administrative headquarters of the US occupation authorities. Several foreign embassies, including those of the US and UK, are situated there.
Most Iraqis have been excluded from the Green Zone unless they have special permission, and large bribes have been paid to get round stringent entry procedures, according to AFP news agency.
The zone has been targeted by bombings and rockets over the years, and the fortification measures were aimed at making it more secure, although attacks in Baghdad are still commonplace.
Mr Abadi also ordered the removal of barriers and checkpoints set up on main roads and sidestreets in Baghdad and elsewhere by prominent figures and militias.
The order to lift the restrictions is part of a series of measures to defuse tensions and root out corruption. A panel will also be set up to recover state property appropriated by elites which are found to have been illegally obtained.
In recent weeks, thousands of Iraqis have taken to the streets in Baghdad and other cities to protest against the failure to provide basic services and against corruption.
They have been backed by Iraq's preeminent Shia cleric Grand Ayatollah Ali al-Sistani and powerful Shia militia leader, Moqtada Sadr.

The Mayor of London who is in the country on a trade visit was invited to join children on a mini turf pitch in Tokyo for the non-contact game.
Toki Sekiguchi was knocked to the ground and said he "felt a little pain".
The mayor, a keen rugby fan, shook the boy's hand and apologised.
In the game of touch rugby the person with the ball is stopped by being touched, not tackled, as in union rugby.
Slo-mo BoJo
He has form. He brought a child to the ground last year in a football kickabout.
And in 2006 he played in a charity England-Germany football match. Although only on for 10 minutes he stunned the 20,000-strong crowd by flooring retired German midfielder Maurizio Gaudino in a rugby-style tackle.
Of that incident he said: "When he was about two yards away I just put my head down. I was going for the ball with my head, which I understand is a legitimate move in soccer."
In Tokyo, the pair later posed for photographs and Mr Johnson handed over a 2015 rugby ball to the youngster.
Iraqi Prime Minister Haider al-Abadi has ordered officials to open up to civilians the heavily-fortified area of Baghdad known as the Green Zone.
[NEXT_CONCEPT]
Boris Johnson has knocked over a 10-year-old child while playing touch rugby in Japan.