Additional and sessions judge Shehzad Raza approved bail for the Khokhar brothers against a surety of Rs50, 000 each.
The Nawab Town police had registered a first information report (FIR) against them on charges of land grabbing.
The court directed the police to submit a progress report in the case on the next hearing on Jan 19.
Earlier, on Jan 6, Chief Justice of Pakistan Mian Saqib Nisar ordered the Anti-Corruption Establishment (ACE) to bring an end to the illegal occupation of land by Khokhar Palace in Lahore.
A two-judge bench headed by the chief justice was hearing a suo motu case at the Lahore registry on alleged encroachment by the Khokhar brothers.
The top judge had earlier taken notice of a complaint made against the Khokhar brothers by an overseas Pakistani who accused them of illegally occupying his land and building Khokhar Palace there.
On Dec 25, Afzal was taken into custody from the Lahore registry but was released on post-arrest bail by a judicial magistrate the next day.
According to a report submitted by the ACE, the Khokhar brothers have encroached upon 40 kanals of land in Nawab Town.