The Belgian defender will now be eligible to play against Fulham this Saturday, the following weekend's FA Cup tie against Stoke, and the Premier League trip to Queens Park Rangers on Jan 29.
Having reviewed DVD evidence of the incident which had been submitted by City, the independent regulatory commission judged that Dean had made an "obvious error" in dismissing Kompany and found in the City captain's favour during a hearing which lasted just over an hour.
But with the panel having to find that the incident was not sufficient to merit a red or yellow card in order to come to the conclusion that Dean had made an obvious error, senior figures within the Professional Game and Match Officials Ltd are understood to have concerns over the confusion generated by Kompany's reprieve.
In the past month, Everton midfielder Darron Gibson, West Ham forward Carlton Cole, Huddersfield midfielder Anthony Gerrard and Millwall defender Adam Smith have all successfully appealed against red cards.
Despite the panel's view that Dean made an error in dismissing Kompany, he will remain in charge of Swansea's Premier League fixture against Stoke this weekend.
Kompany's appeal success has alleviated the defensive shortage facing City manager Roberto Mancini, who is already without key men in Maicon, Kolo Touré, Jack Rodwell and Micah Richards.
The Italian is understood to remain keen to sign a new defender this month, however, and efforts continue to identify a suitable recruit before the transfer deadline on Jan 31.
With Kompany winning his appeal, however, referees have received the backing of West Ham manager Sam Allardyce, who claims that officials are coming under increasing pressure to get decisions right.
Allardyce said: "I think they are all going to make mistakes, but you make more mistakes the more you are put under pressure.
"In life, whatever you do, if you are constantly putting the referee under pressure from above then he has more pressure on the field.
"Then he is less relaxed, he is tense, his pupils dilate a little bit more, he will not think as clearly as he should think and then he starts making mistakes."