The 15-year-old was shot in the head by the Taliban in Pakistan in October and later flown to Britain for specialist treatment.
She will continue her rehabilitation at her family’s temporary home in the West Midlands before having cranial reconstructive surgery in the next month, her doctors say.
Dr Dave Rosser, medical director at University Hospitals Birmingham NHS Foundation Trust, said: “Malala is a strong young woman and has worked hard with the people caring for her to make excellent progress in her recovery.
“Following discussions with Malala and her medical team, we decided that she would benefit from being at home with her parents and two brothers.
“She will return to the hospital as an outpatient and our therapies team will continue to work with her at home to supervise her onward care.”
Over the past couple of weeks she has been leaving the hospital on a regular basis on ‘home leave’ to spend time with her father Ziauddin, mother Toorpekai and younger brothers, Khushal and Atul.
Malala was shot on a school bus for campaigning for women’s rights and their right to an education.
The bullet entered just above her left eye and ran along her jaw, ‘grazing’ her brain. It was later removed by surgeons in Pakistan before she was flown to the UK.
She is now likely to secure permanent residence in the UK after her father was granted a job with the Pakistani consulate in Birmingham.
Mr Yusufzai has been appointed education attache for three years, with the option of an extension for a further two years afterwards.
Both he and his daughter have had threats made against their lives by the Taliban since the shooting.