The Polisario Front released all prisoners on Tuesday following negotiations with Irish Human Rights Minister Tom Kitt.
The minister confirmed the release, saying he had met some of the released prisoners in the town of Tindouf in an area of southwestern Algeria.
The region is home to more than 160,000 Western Sahara refugees from the conflict between the Polisario and Morocco.
Termed a humanitarian gesture, the release brings to "1843 the number of Moroccan prisoners of war who have now been unilaterally released by the Polisario Front," the group said in a statement.
Kitt meanwhile urged the Polisario and the Moroccan government to build on the "constructive development".
"During my meetings with Polisario representatives who visited Dublin in recent months I exhorted them to urgently consider further prisoner releases.
"I stressed that the continued holding of such prisoners could only be detrimental to the Polisario's broader political cause."
Morocco annexed Western Sahara after Spanish settlers pulled out of the large, phosphate-rich desert territory in 1975 and the Polisario Front took up arms to fight for its independence the following year.
The Polisario fought a guerilla campaign against Morocco until 1991 when a ceasefire was brokered by the United Nations.
Kitt said that since the ceasefire came into effect, the Polisario have released most of the prisoners they took during the conflict but that 514 remained in their hands.