An Austrian court on Thursday approved the transfer of Josef Fritzl -- who imprisoned his daughter in a cellar for over 24 years and fathered seven children with her -- from a special security unit to a regular jail.

Fritzl, 88, was "very moved" by the court decision and would apply for a full release next year, his lawyer said.

Fritzl was jailed for life in 2009 for the murder by neglect of a new-born baby he fathered with his daughter Elisabeth while holding her in the purpose-built basement of his house.

He was also found guilty of incest, sequestration, grievous assault and 3,000 instances of rape.

Fritzl has been held in a jail for the mentally ill who pose a high degree of danger in Krems, some 80 kilometres (50 miles) northwest of Vienna.

The Krems reginal court approved Fritzl's  application to be moved to a regular jail -- the first step to eventually seeking a release, according to his lawyer Astrid Wagner.

"The court came to the conclusion that he is no longer dangerous" based on a new psychiatric report, Wagner told reporters outside the court.

"He is now to be transferred to a regular prison, but must undergo regular psychiatric examinations," she said, adding that Fritzl  was "very moved" by the decision. 

Calling Thursday's ruling "an important first step", she added she planned to apply for her client's release next year.

She cited his frail health due to his age and an onset of dementia, as well as him having already served the minimum 15 years in jail necessary for life-long convictions.

A court spokesman confirmed the verdict, which can still be appealed by prosecutors.

The court heard the case of Fritzl -- one of Austria's most notorious criminals, who has since changed his name -- behind closed doors, with a throng of media gathered outside the court. 

Fritzl was brought to the court in a police van that entered a garage at the back of the court and led inside the court room without being visible to the public or media representatives.

A retired electrical engineer, Fritzl locked his daughter in the family's cellar in 1984, when she was 18 years old. 

While claiming she had run away from home, Fritzl kept her in the basement in Amstetten, west of Vienna, until 2008, raping her repeatedly which resulted in the birth of seven children. One died aged just a few days. 

The case came to light when one of the surviving children became ill and had to be hospitalised.

His neighbors and his wife Rosemarie and children living upstairs with him, said they had no inkling of Fritzl's double life and the unimaginable horrors that played out in the warren of windowless, soundproofed rooms beneath their home.

Elisabeth and her surviving children have  taken on new identities and moved to an undisclosed location.