Prison nurse Fiona Graham, who worked at HMP Glenochil between 1997 and 2005, was struck off the register in February last year at an NMC professional conduct committee hearing.
Ms Graham admitted mixing up named caps on three insulin pens while on duty in March 2004 – but said that each prisoner had received the correct dosages from the correct needles.
However the RCN appealed against the case in the Court of Session and judges ruled this week that the correct sanction was merely a caution.
The court decided that another nurse, who was working with Ms Graham and reported the incident, should also have been held responsible.
It also ruled the decision to strike off Ms Graham was excessive and disproportionate.
RCN Scotland officer Lynn McDowall, said: ‘This is a great result. Our member had a long and unblemished career of more than 35 years. She suffered four years of distress and uncertainty as a result of the original decision and feels finally vindicated by the outcome of this case.’