India's Iyer was injured last week while taking a catch to dismiss Alex Carey, clutching his side and grimacing in pain after tumbling to the turf.
The BCCI said the 30-year-old suffered a blunt injury to his abdomen, leading to a laceration of his spleen with internal bleeding, in a condition Indian media said was life-threatening.
"The injury was promptly identified, and the bleeding was immediately arrested following a minor procedure. He has undergone appropriate medical management," the BCCI said in a statement.
"The BCCI medical team, along with specialists in Sydney and India, are pleased with his recovery, and he has been discharged from the hospital today."
Iyer will remain in Sydney for follow-up consultations and return home once cleared to fly.