The classification was downgraded as their number in the wild has reached 1,800.
Experts say that the country managed to save its iconic animal through its long-term conservation efforts, including the expansion of habitats.
China considers pandas a national treasure, but have also loaned them to other countries as diplomatic tools.
The latest classification upgrade "reflects their improved living conditions and China's efforts in keeping their habitats integrated", said Cui Shuhong, head of the Ministry of Ecology and Environment's Department of Nature and Ecology Conservation at a news conference.
The new classification comes years after the International Union for Conservation of Nature (IUCN) had already removed the animal from its endangered species list and re-labelled it as "vulnerable" in 2016.
At the time, however, Chinese officials had disputed the decision, saying that it could mislead people into believing that conservation efforts could be relaxed.
This week's announcement by China's environmental ministry is the first time the animal's status was changed on its own endangered species list, which uses similar standards as the Swiss-based IUCN.
Chinese social media users were delighted at the news, saying that it is "proof" that conservation efforts are worth it.