The €4m of Irish aid misappropriated in Uganda will still be spent on projects in the country - but it will not be funnelled through the government.
The money fraudulently siphoned off by Ugandan government officials was repaid to the Irish Government, an Irish newspaper, The Independent has reported.
The embargo on Irish aid payments to Uganda has now been lifted.
Irish Foreign Affairs Minister Tanaiste Eamon Gilmore welcomed the reimbursement and said the money would be spent on the development projects which were originally supposed to benefit.
"That will not be done through the Ugandan government," he said.
Last year, it emerged that a number of Ugandan officials colluded in an elaborate fraud to siphon off the money to an unauthorised bank account of the Office of the Prime Minister.
The funding - given to the war-ravaged country in 2011 - was supposed to be distributed under strict controls and used in the peace recovery and development programme for northern Uganda.
The discrepancy in accounts was uncovered by Uganda's auditor general, who contacted Irish officials.
Mr Gilmore immediately suspended all Irish aid payments channelled through the Ugandan government, with €16m of Irish aid put on hold.
In total €12m in aid - from Norway, Sweden, Denmark and Ireland - disappeared.
But after two months of "high-level discussions" with Ugandan officials, the money has been repaid.
However, Mr Gilmore insisted any financial package offered to the country will have "direct oversight from Ireland".