Rose was shown a straight red card after sliding in on Edin Dzeko early in the second half of Wednesday's game at White Hart Lane, with Yaya Toure converting the resulting penalty to put City 2-0 up.
Replays showed that despite making a challenge from behind, Rose made contact with the ball, and after studying video evidence the FA decided to overturn referee Andre Marriner's decision.
FA Statement: "Danny Rose's one-match suspension has been withdrawn with immediate effect after the Tottenham player's wrongful dismissal claim was upheld by an Independent Regulatory Commission."
Rose will now be available to play in Spurs' Premier League away game at Hull City on Saturday.
Manuel Pellegrini disagreed with Tim Sherwood's interpretation of the spot-kick and feltthe referee was right to dismiss Danny Rose.
Manuel Pellegrini: "I don't think it was a big decision because before the red card we missed at least five clear chances to score in the first half.
"If we review the first 45 minutes I don't remember just one chance for Tottenham, I think our team was the best team from the beginning.
"If you ask me it was a clear penalty and a clear red card because he was the last man.
"The sending-off was not the thing that changed the game, the game was over and completed from the beginning for our team."