Tracey Connelly could be out of jail within weeks after board judges refused the bid by Justice Secretary Dominic Raab to keep her behind bars for longer.
But Mr Raab condemned the decision and said it was proof the Parole Board needed a “fundamental overhaul”.
He tweeted: “Tracey Connelly’s cruelty towards her son, baby Peter, was pure evil.
“The decision to release her demonstrates why the parole board needs a fundamental overhaul – including a ministerial check for the most serious offenders – so that it serves and protects the public.”
Now 40, she was jailed at the Old Bailey in 2009 for causing or allowing the death of her 17-month-old son Peter at their home in Tottenham, north London, on August 3, 2007.
Connelly was released on licence in 2013 but recalled to prison in 2015 for breaching her parole conditions.
In March the Parole Board decided she was suitable for release, having rejected three previous bids.
But last month Mr Raab asked the board, which is independent of government, to re-examine the decision under the so-called reconsideration mechanism.
On Thursday the Parole Board announced that application had been rejected and the original decision upheld.
A spokesman said in a statement: “Following the reconsideration application from the Secretary of State, a judge has ruled that the decision made by independent Parole Board members to release was not irrational, as stated in the reconsideration application, and the original decision is upheld.”