Palo was suspended in 2012 after being charged with second-degree sexual assault. The charge was dropped a year ago, and the university's Office of Judicial Affairs cleared Palo to return to the team.
The university's decision was then appealed. Palo was found to have violated Iowa State's student code of conduct and kicked off the team.
A Webster County judge on Thursday issued a temporary stay for Palo, allowing him to play pending the outcome of further court proceedings.
A final hearing date on Palo's status has not been set. Palo averaged 2.8 points in 17 games last season.