Grossman missed most of the preseason with a hamstring injury. He returned Friday night to throw two touchdown passes in Houston's 27-20 win over Tampa Bay and survive the last round of cuts on Saturday.
"He did a heck of a job," coach Gary Kubiak said. "He was very impressive with how he played and how he handled the football team ... obviously he was very impressive not only to me but to his teammates and earned his way on this team."
The Texans released 22 players, including quarterback Alex Brink, to get down to the 53-player limit.
Grossman, who led the Bears to the Super Bowl in 2007, was so impressive Kubiak said he and Dan Orlovsky are now even in the competition to be Matt Schaub's backup.
Kubiak said he'll make a decision on who will be the second quarterback before Houston's opener Sept. 13 against the Jets. He plans to evaluate both of them with the first team in the next couple of practices while Schaub recovers from a sprained ankle he hurt on Monday night against Minnesota.
Schaub is expected to start against the Jets.
"Really for me it's about being comfortable with who's got the best grasp of what we're doing," Kubiak said. "There's plenty of work to go around. There's no hurry for that. They need to both get ready to play."
One of the players released on Saturday was veteran cornerback Deltha O'Neal. He was signed early in camp because of injuries, but didn't progress as Kubiak had hoped.
Houston also released cornerbacks Matterral Richardson and Mark Parson and safety Brandon Harrison, a fifth-round pick in 2007. The Texans also cut long snapper Clark Harris after tight end Joel Dreessen proved he could handle the job.
Houston decided to keep six receivers on the roster thanks in part to Jacoby Jones' performance on Friday night when he scored on an 87-yard touchdown reception. Kubiak said Jones, a punt returner, and fellow receiver Glenn Martinez are valuable because they play both offense and special teams.
The Texans released receivers Darnell Jenkins and Mark Simmons, running back Arian Foster and fullback Jonathan Evans.
Among others let go were tackles Adam Stenavich, Brandon Torrey and Cliff Washburn, center Brett Helms and linebackers Khary Campbell and Buster Davis.