Egyptian telecommunications engineer Ala Maqar was freed along with two Iraqi engineers whose identities have not yet been confirmed.
Egyptian officials last week said six Egyptian workers for the Iraqi unit of Egypt-based Orascom Telecom were kidnapped in Iraq.
Sources at the embassy in Baghdad said the remaining Egyptian captives would also be freed, but gave no idea as to when.
Foreign Minister Ahmad Abu al-Ghait, asked by Canada's CBC television about reports that the captors were demanding a ransom, said Cairo had had no direct dealings with those responsible for seizing Maqar.
"We have not yet identified the kidnappers and they have not yet come forward with a line of approach," he said during a visit to Ottawa.
"So I wouldn't say that a ransom has been asked [for] or that there will be a readiness to pay a ransom."
Over the last six months more than 100 foreigners have been taken captive in Iraq. Most have been freed, but about 30 have been executed.