Murphy, 24, sustained his most recent concussion during the Magpies' grand final win over the Brisbane Lions in September.
Collingwood had asked the AFL to assess the 57-game defender's condition, noting he had suffered multiple concussions throughout his career.
Murphy has now been permitted to return to the field in 2024.
"Nathan's health and wellbeing remains our absolute priority," Collingwood football boss Graham Wright said in a statement.
"Nathan suffered a concussion late in the first quarter of the grand final and following this incident – combined with his medical history – the club together with Nathan and his family, engaged with concussion specialists and the expert concussion medical panel convened by the AFL to assess a return to play.
"At the conclusion of this process, the expert concussion medical panel convened by the AFL determined that Nathan was able to return to playing football in the elite AFL competition.
"The health and welfare of all athletes at Collingwood remains paramount and any incidence of concussion will continue to be managed appropriately and in line with the AFL's current concussion guidelines."
Former Sydney and St Kilda player Paddy McCartin was forced to retire in August after the league's concussion experts recommended he stop playing.
The 2014 No.1 draft pick, McCartin had a long history of concussion, which led to his delisting by the Saints at the end of 2019.
His comeback with the Swans lasted just four rounds into a second season.
Brisbane's Lincoln McCarthy and Magpie Nathan Murphy clash during the 2023 AFL grand final. (Joel Carrett/AAP PHOTOS)
Collingwood's Murphy was concussed not long before quarter time in the grand final when his head collided with Brisbane forward Lincoln McCarthy's shoulder as the pair contested a loose ball.
Murphy ruled himself out of returning to the field, missing the majority of the Magpies' victory.
He had been a key cog in their premiership success, playing 24 of a possible 25 games throughout 2023.
The only game Murphy missed was in round six, when he was sidelined under concussion protocols.
It followed an incident that led to St Kilda forward Anthony Caminiti being banned for three matches for striking.
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