The castle, which was built by Romania's first German-born king, Carol of Hohenzollern-Sigmaringen, belonged to the royal family until 1948, when it was confiscated by the communists and later turned into a personal residence by communist dictator Nicoale Ceausescu.
Experts say the real value of the Peles castle, which holds valuable art collections and has been turned into a museum, may be well in excess of 30 million euros. But the king's lawyer, Adrian Vasiliu, told RFE/RL that the bill represents a reasonable compromise:
"[The result] is satisfactory, in the sense that it constitutes a compromise reached by both sides toward resolving a long-running dispute, which satisfies everybody to a reasonable extent," Vasiliu said.
The former monarch would also be able to occasionally use the Peles castle for receptions and other functions.
The bill would give King Michael and his wife, Queen Anna, lifetime rights to use the Elisabeta Palace, a former royal palace in Bucharest. Their eldest daughter, Princess Margareta, and her husband also have lifetime rights to use the palace.
The upper house of Romania's parliament, the Senate, passed the bill last month. To take effect, it also needs to be signed by President Traian Basescu.
Michael is a member of the German Hohenzollern-Sigmaringen dynasty that ruled Romania from 1866 until 1947. He was king twice -- first as a child in the late 1920s, and then between 1940 and 1947.
Moscow-backed communists forced Michael to abdicate and leave the country in 1947, despite what is seen as his key role in overthrowing Romania's fascist dictator Ion Antonescu in 1944 and in bringing Romania out of its alliance with Nazi Germany.
While living in exile in Britain and Switzerland, Michael worked as a stockbroker, a farmer, and a test pilot.
British historian Dennis Deletant, an expert in Romanian affairs, tells RFE/RL that it was high time Romania made reparations to the former monarch.
"Romania is trying to do its best to meet the convergent requirements of entry to the European Union and also at the same time wants to show that it's prepared to confront its past and to repair the damage that was inflicted on a major personality like the king," Deletant said.
The adoption of the restitution bill also marks the end of a long and strenuous effort by the former monarch to regain his properties confiscated by the communists.
After the collapse of communism in 1989, Michael was at first banned from returning to Romania by former President Ion Iliescu and his ex-communist government.
In December 1990 -- in one of the Iliescu government's most embarrassing episodes -- Michael was allowed to enter the country, only to be expelled several hours later after his motorcade was halted by army trucks.
It was only during President Emil Constantinescu's center-right government term between 1996 and 2000 that Michael was given back his Romanian citizenship.
During the same period, Michael began the legal fight to claim confiscated property.
In 2001, a re-elected President Iliescu underwent a change of heart and made gestures of reconciliation toward Michael, such as granting him rights extended to all former Romanian heads of state. The rights included an official residence with an advisor and secretary, security, a stipend, and a car with a driver.
Romanian historian Zoe Petre, an advisor to former President Constantinescu, says the parliament's decision is a normal one and was long overdue, since it regards only the royal family's private possessions.
"The crown domains had separate administrations, and the royal house could only use them, [not own them]. As in each constitutional monarchy, there was a very clear separation between the royal family's personal property and the property which the state allocated for the maintenance of the monarchy institution," Petre said.
Former monarchs in other southeast European countries have also pursued legal efforts to reclaim private property confiscated by the state.
In 2000, the European Court of Human Rights ruled that the Greek government's 1994 decision to confiscate exiled King Constantine's properties was illegal and ruled that they should be returned.
In 2001, Crown Prince Alexander of Yugoslavia was allowed to return to his palace by the new government in Belgrade.
In 2003, Bulgaria's former king and current prime minister, Simeon Saxecoburggotski, was restituted real estate worth many millions of dollars.
And in 2004, Karl von Hapsburg, the grandson of the last Austro-Hungarian emperor Karl I, launched a legal claim to regain private property confiscated by the Nazis from his family in 1938.
British historian Deletant says the success of such legal attempts shows that democracy is beginning to take root in a region long-marred by dictatorships.
"I think in general it's a recognition on the part of democratic governments now that an account has to be given of the past, and a balanced account of the past [must be] made in their countries, and that includes of course, facing up to, or acknowledging the role, that the monarchs played in these countries, in some case a role that was very positive," Deletant says.
Unlike his peer and relative Simeon in neighboring Bulgaria, Michael has expressed little interest in returning to politics. In 1992, he flatly rejected a Liberal Party proposal to run for Romania's presidency. Furthermore, Michael never reclaimed his throne and stayed away from politics.
Instead, Michael dedicated himself to using his connections with European royalty to promote Romania's efforts to join NATO.
Deletant also believes Michael could and should be a role model for his fellow countrymen.
"There is this legacy of misrule in Romania, which King Michael has done his best to overturn and to really represent the values that I think many Romanians in their hearts cherish -- that is, namely, constitutional rule and decency in public life," Deletant says.