The ban was due to "a tangible danger...that Vanunu wishes to divulge state secrets, secrets that he has not yet divulged and which have not been previously published," a Defence Ministry statement said.
Vanunu's brothers voiced fears for his safety during the year he will be forced to stay in Israel, where the former nuclear technician is widely despised as a traitor for revealing Israel's nuclear secrets to a British newspaper.
Appealing to Britain to offer Vanunu sanctuary, his brother Meir told BBC radio: "If something happens to my brother, the blood and responsibility...is also on the British government."
Vanunu's brothers rented him a luxury seaside apartment in Jaffa, southern Tel Aviv, close to a church where the 49-year-old Christian convert can attend prayers. The location was supposed to have been secret but was leaked to the media.
Vanunu will be required to advise police if he stays overnight anywhere else. He must not approach border exits or talk to foreign nationals without prior approval for at least six months.
Israel has kept Dimona nuclear
reactor closed to inspection
Security services will be keeping a close eye on Vanunu.
"The keys are in Vanunu's hands. The re-issuance of the restrictions depends on the steps he takes, on his conduct and on future violations of the law," the Defence Ministry said.
Vanunu was jailed in 1986 for treason after disclosing information to Britain's Sunday Times which led analysts to conclude Israel had produced more than 100 nuclear warheads.
The revelations embarrassed Israel which has maintained a strategic ambiguity over its nuclear programme in an attempt to ward off its foes while avoiding a regional arms race.
Security officials say Vanunu will be bound by a non-disclosure agreement he signed when he was hired to work at the Dimona reactor in 1976.
The ban was due to "a tangible danger...that Vanunu wishes to divulge state secrets, secrets that he has not yet divulged and which have not been previously published"
Israeli Defence Ministry statement
Israel has kept the nuclear reactor in Dimona - where Vanunu worked for nine years until he was fired in 1985 - closed to international inspection.
The grey-haired Vanunu, who was disowned by most of his family, denies having anything more to reveal about Israel's nuclear capabilities, but says he wants to campaign against its nuclear programme.
Supporters say the Israeli restrictions are an attempt to gag legitimate anti-nuclear activism.
Anti-nuclear campaigners, Irish Nobel laureate Mairaed Maguire and British actress Susannah York were among scores of supporters who arrived in Israel to celebrate Vanunu's release.
Asher Vanunu accused the authorities of orchestrating a smear campaign against his brother after television stations aired an audio tape of Vanunu talking to security officers.
In the tape Vanunu, who spent 12 years in solitary confinement, incensed many Israelis by saying Israel's nuclear reactor should be destroyed, that the Jewish state should not exist and that Judaism is a backward religion.
The list of prohibitions slapped on Vanunu was less severe than those originally proposed after justice officials concluded they were illegal and could be overturned by the Supreme Court.
Speaking out for the restrictions Shimon Peres, the founder of Israel's atomic programme, told Army Radio: "Vanunu violated norms and betrayed his country...This is justice".