"Portugal's economic recovery and budgetary consolidation continue in line with our expectations, putting net government debt to gross domestic product on a declining path after 15 consecutive years of increases," the statement read.
Portugal had been rated BB since 2012, a year after the country had to seek a 78-billion-euro bailout from international lenders when it was on the verge of bankruptcy.
"The upgrade reflects our view of Portugal's steady economic recovery, supported by gradually improving labor market conditions," the statement read.
The New York based agency on Friday also gave the country a stable outlook and said it expected "broad policy continuity" regardless of who wins in the general elections on Oct. 4.
The center-right ruling coalition is running almost neck and neck with the center-left Socialist Party according to recent polls.
The agency also noted that Portugal's rating could be downgraded if the government "deviates from economic policy."