Chiluba's trial has been stalled since May 2006 due to concerns about his health.
The court said Chiluba's trial should go ahead after receiving a recommendation from doctors who evaluated him after he was admitted to a Lusaka hospital last week.
Chiluba, who had collapsed at home, was discharged on Tuesday.
Chinyama said: "We should proceed with this case. Whether the proceedings should be at [Chiluba's] home or through video-link is up to the defence to decide."
The magistrate made the order after medical experts presented a report in which they stated that he was medically unfit to stand trial in court but could do so in a comfortable environment.
Doctors have advised Chiluba to return to hospital for treatment as well as travel to South Africa for a medical review within the next month, according to a spokesman for the former Zambian leader.
Chiluba has been receiving treatment at a Johannesburg clinic since last year.
The charges against him stem from an anti-corruption campaign launched by his successor, Levy Mwanawasa, Zambia's president.
Chiluba has described the case against him as a "political witchhunt".
The London high court earlier this month found Chiluba and his associates guilty of stealing $46m in state funds.
|"The accused has suffered great injustice in these proceedings"|
Robert Simeza, attorney for Frederick Chiluba, former Zambian president
The case was heard in Britain because the allegedly stolen funds passed through London bank accounts, but Chiluba rejected the verdict because it had been passed by a foreign court.
Chiluba's lawyers argued on Thursday that the London judgment had prejudiced his trial in Zambia and that it should be stopped because the magistrate would have been influenced by the verdict in the British case.
Robert Simeza, Chiluba's attorney, said: "The accused has suffered great injustice in these proceedings."
Simeza also objected to the idea of the ex-leader being tried in his home, saying it was unconstitutional.
The trial is scheduled to resume on August 14 to 31.