Blues announced last Wednesday the 31-year-old had contracted coronavirus and had to been admitted to hospital.
But head coach Lee Bower has confirmed he is now out and recovering at home with his family.
“Everybody is smiling and grateful that he is back home,’ Bowyer said.
“It is great news. We can’t rush and we have to see how he progresses, but the most important thing is he is back with his family.’
Etheridge, who made 43 appearances for Blues last season, provided an update on his Instagram story from hospital on Thursday.
It read: “Hi everyone, I’m feeling stronger today.
“I just wanted to let everyone know I’m slowly on the mend.
“I’m so overcome with feeling of thanks that I don’t even know where to start.
“I’ll put something a little more detailed out soon but all I can say for the time being is... thank you.”
Craig Gardner, Birmingham’s technical director, added: ‘On behalf of the board, the staff, the players and everyone connected to the club, we’re all behind Neil and willing him on his battle against Covid-19.
“We’re in constant contact with his close family and will continue to support them in any way we can.”
Blues begin their league campaign at Sheffield United on August 7.