The Paralympic champion has been accused of murdering his girlfriend after she was found shot dead at his Pretoria home in the early hours of February 14.
Bail has been set at one million rand (£73,000) and Pistorius must return to court on June 4.
Magistrate Desmond Nair announced his decision today (February 22) in a two-hour statement after four days of legal discussions.
He stressed that the issue at hand in deciding bail was not solely the matter of the defendant's possible guilt, but whether or not the interests of justice would be served by the granting or withholding of bail.
Nair said that key to his decision was the detail of Pistorius's affidavit to the court - which directly addressed the state's case, rather than simply denying his guilt.
As the court designated the case a premeditated schedule six offence, the defence had attempted to prove "exceptional circumstances" of the weakness of the state's case for bail to be granted.
Specifically, Nair said that he had considered whether or not the defendant could afford to lose bail money, whether or not he had a propensity to violence, and if he will evade trial.
While not finding that the defence had shown the state's case to be so weak as to reach this level, the case was also not shown to be "so strong and watertight" that Pistorius would think he had to flee or evade his trial.
Nair asked if Pistorius would "duck and dive" to escape a trial, given the circumstances of the case where he may not definitely face a lengthy prison sentence, and concluded that the athlete would not be a flight risk.
He added that ex-lead investigating officer Hilton Botha had not spent enough time to prove propensity to violence on Pistorius's behalf, having not presented medical or other compelling evidence.
Nair previously took apart Botha's testimony, highlighting errors in the investigation, "bumbling" evidence and concessions to the defence, including his "perception of distance" between Pistorius's home and a female witness who had given him a statement.
However, he added that problems with the evidence and credibility of Botha's circumstantial evidence - the only evidence in the matter - did not mean that the state's case was not strong.
Nair admitted he had difficulties with various aspects of Pistorius's version of events on the night.
This included why he did not try to find Steenkamp when he first thought an intruder was in the house, why he did not find out who was in the toilet before shooting, why Steenkamp did not shout back when Pistorius yelled into the bathroom, and why he went into the possible danger of the bathroom rather than escaping through the bedroom door.
At the start of the session, Nair had first addressed the matter of media coverage, explaining why he did not allow cameras in the courtroom.
He said that edited highlights may do the process of justice a disservice and that flashing cameras were an unwelcome intrusion.
Nair then spoke through the entire timeline of the case up until the end of today's arguments.
The magistrate then explained his reasons for Pistorius being detained in police cells during the hearing, rather than prison.
He said that it was to avoid any delay in the bail hearing and to protect Pistorius's right to present evidence of any "exceptional circumstances" by enabling him to regularly see his lawyers - but said that no precedent had been set in this regard.
Nair recounted Pistorius's statement, starting with his claim not to be guilty of murder, premeditated or otherwise.
Pistorius admitted shooting dead Steenkamp through a toilet door, but told the authorities that he thought she was an intruder when firing the shots.
He added that Pistorius pledged not to contact any witnesses, flee the scene and would also hand in his passport.
Nair then summarised the presentations and cross-examinations over the course of the four-day hearing from prosecutor Gerrie Nel and defence lawyer Barry Roux.
The magistrate said that the state had met the threshold for a schedule six case of premeditated murder to be brought.
Lead investigator Botha, who underwent robust cross-examination from Roux, was taken off the case yesterday when it emerged that seven charges of attempted murder against him relating to an incident in 2011 had been reinstated.
Oscar Pistorius - photo gallery: