The Moroccan Munir al-Mutasaddiq was sentenced by a German court to 15 years in 2003 for conspiring to murder about 3000 people in the 2001 plane attacks in the United States.
The same court ruled on Wednesday he should be released .
But he will not be allowed to leave the city of Hamburg before his retrial, expected to begin in June, and must report regularly to police, a representative of his lawyer, Gerhard Strate, said.
The 29-year-old had also been found guilty of belonging to a German al-Qaida cell that included three of the hijackers.
"Mr Mutasaddiq will go free today, but not without conditions," court spokeswoman Sabine Westphalen told German television. Al-Mutassadiq will have to appear in court when asked and will not be given his confiscated passport back, she said.
Germany's Supreme Court ordered the retrial a month ago.
Al-Mutasaddiq's release is likely to be seen by the US and Germany as a major setback in Washington's "war on terror".
Prosecutors had described him as a "vital cog" in the September 11 plot.
"Mr Mutasaddiq will go free today, but not without conditions"
Al-Mutasaddiq's lawyers have argued that new evidence, which secured the acquittal of their client's friend and fellow Moroccan Abd Al-Ghani Mzudi on similar charges, also made their client's conviction unreliable.
They said a retrial could prompt Washington to release more information.
Mzudi's acquittal in February hinged on information, passed to the court by German investigators, that neither he nor al-Mutasaddiq had belonged to a core group of plotters in Hamburg who had advance knowledge of the hijack plans.
The information was presumed to have come from US questioning of Ramzi bin al-Shaiba, a key al-Qaida suspect and member of the Hamburg cell, who is in US custody. The trial judge said the court could not assess its reliability, but that it had to give Mzudi the benefit of the doubt.
Al-Mutasaddiq insists he had no knowledge of the September 11 plot and did no more than help fellow Muslims living abroad.
He did, however, acknowledge that he had been trained at an al-Qaida camp in Afghanistan.