Prosecutors had re-applied for his detention on May 9th after receiving "new information" from Madrid suggesting there was a greater risk that he may try to flee Germany.
But the court in Schleswig-Holstein said it "did not see an increased risk of flight for Carles Puigdemont", ruling therefore that he should remain free on bail while his extradition request is pending.
Puigdemont was detained in northern Germany late March after Spain issued a European arrest warrant against him for his role in Catalonia's failed bid to break from Spain last October.
He had been living in self-exile in Belgium since then but was travelling through Germany when he was arrested.
Madrid wants Puigdemont to return to Spain so he can face trial for alleged rebellion, which carries a sentence of up to 30 years.
But the Schleswig-Holstein court released Puigdemont on bail on April 6th after finding that he could not be extradited for rebellion. It has yet to rule on whether to send him to Spain to face another, lesser charge of misuse of public funds.
Prosecutors on Tuesday said the information they received from Spanish authorities included videos that showed "acts of violence against Spanish police" by pro-independence demonstrators, which they said could be used to justify the rebellion charge.
Rebellion is not punishable under German law and German judges earlier ruled that the closest legal equivalent, high treason, did not apply because Puigdemont's actions were not accompanied by violence.
The prosecutors' statement added that they were preparing a formal application asking the court to allow Puigdemont's extradition.
According to his release conditions, Puigdemont may not leave Germany and must report to police weekly as he awaits a decision on his extradition.
With his legal woes preventing him from being re-appointed president of Catalonia, Puigdemont earlier this month anointed a handpicked successor, bringing the region a step closer to ending the political impasse.