Since Mr Rahman was removed from office in 2015, the council has been run by Government-appointed commissioners.
Communities Secretary Sajid Javid announced he is "minded" to restore full powers to the authority, with commissioners leaving at the end of March.
Announcing the decision, Mr Javid said: "Two years ago, Tower Hamlets Council had completely lost the trust of its residents.
"It was mired in corruption and financial mismanagement that only direct intervention could resolve."
Mr Javid said he would "keep a close eye" on the borough, with elected mayor John Biggs reporting directly to him on progress every three months for the next year and a half.
The commissioners were appointed at the end of 2014 following a critical independent report into the council's award of grants and sale of properties under former mayor Lutfur Rahman
Mr Rahman was removed from office in April 2015 after being found guilty of electoral fraud after an Election Court trial.
The news also comes after independent councillor Shahed Ali was jailed for five months and disqualified from office in October due to housing fraud.
He was a close ally of Mr Rahman, having served in his Cabinet before the former Mayor was kicked out of office.
Mr Javid added: "Thanks to Sir Ken Knight and his team of commissioners working closely with the new Mayor, I am confident that Tower Hamlets Council is on the right track to provide the services their residents deserve and rightly expect."
Mr Biggs said: "Over the past 21 months the council has undergone a complete transformation. Under the previous mayor this was a council drowning in crisis, corruption and controversy.
"Since then we have brought in new leadership, opened up the decision-making process and challenged historic wrongdoing and bad practice.
"Tower Hamlets is an amazing place to live, our residents deserve a top performing council and services to match - that is my ambition.
"There are still massive challenges from the past we are working to repair."