The Alcohol and Tobacco Tax and Trade Bureau had ordered Vaune Dillmann to stop using the caps, which are a play on the name of the town where he brews his beer - Weed. The bureau said the message amounts to a reference to illegal drugs.
Dillmann appealed and was preparing for a legal fight when he received a registered letter this week saying he can continue using the bottle caps. He shared a copy of the letter with The Associated Press on Tuesday.
"Based on the context of the entire label, we agree that the phrase in question refers to the brand name of the product and does not mislead consumers," said the letter, dated July 31.
A message left after-hours for alcohol bureau spokesman Art Resnick in Washington, D.C., was not immediately returned Tuesday.
The dispute started last winter after Dillmann sent the bureau Mt. Shasta Brewing Co.'s proposed label for its latest beer, Lemurian Lager.
He included the same bottle cap he'd been using on his other five brews. This time, the U.S. Treasury branch rejected it because of federal laws that prohibit drug references on alcoholic beverages.
Since the dispute was publicized in April, Dillmann said he has received letters, phone calls and messages from more than 1,200 people around the world - including old friends and his high school football coach in his hometown of Milwaukee.
"We have not had one even remotely negative comment," he said.
Dillmann started his brewery in 2004 and named the company's first official brew for the town's founder, Abner Weed, a timber baron who eventually was elected to the state Senate.
All the attention has led to booming sales, but it's also been stressful, Dillmann said.
He plans to resume using the now-infamous bottle caps, which had been replaced with blanks while the dispute was pending.
Dillmann also drafted a letter thanking supporters. His message: "Weed fought the law and Weed won!"