Thirteen-year-old Iman al-Hams's body was found riddled with over 17 bullets near an army post in the southern Gaza strip refugee camp of Rafah last October.
The accused commander, identified only as Captain R, was released on Sunday after being confined to an army base for two months.
The Israeli army had initially said that Iman was shot because soldiers feared she was carrying a bomb in her book bag as she approached an occupation watchtower in a security zone that overlooks the refugee camp.
But a three-way radio exchange between the officers that was broadcast on Israeli television in November made clear that the soldiers knew al-Hams was a young girl that posed no threat.
The soldiers in the recording immediately identified al-Hams as a girl of "about 10" that was "scared to death". She was shot in the legs nonetheless.
Captain R then shot the wounded girl twice in the head, and "confirmed the kill" by emptying his magazine into her limp body.
He then said he would have killed her "even if she was three-years-old".
The tape also revealed that the soldiers knew Iman was headed eastwards, away from the army post and back into the refugee camp, when she was shot.
Captain R faced only minor charges such as illegal use of his weapons and conduct unbecoming of an officer.
Iman's outraged parents have said they want him prosecuted for murder.
Israeli rights groups say soldiers
are allowed to kill with impunity
The girl was one of 172 children killed in Gaza in 2004 - and one of 644 killed since the start of al-Aqsa intifada in September 2000, accounting for about 20% of Palestinian deaths.
But only one Israeli soldier has been found guilty of manslaughter, although some1700 unarmed Palestinians have been killed since the start of the intifada, according to the Israeli human rights group B'tselem.
That soldier received a punishment of four months in jail and a reduction in rank.
The Israeli rights group accuses the Israeli military of granting impunity to occupation soldiers who kill Palestinian civilians by issuing what they call "offensive sentences".
The Israeli army, they say, has an "intolerable disregard for Palestinian life, as reflected in the open-fire regulations which encourage a trigger-happy attitude among soldiers, and its policy to cover up and refrain from investigating the killing of civilians".
Of the thousands of cases of dead Palestinians, only 90 were investigated by the military police, 29 of which were filed as indictments, resulting in just one conviction.
The group says that new open-fire regulations established at the start of the intifada permit soldiers to shoot at Palestinians in non-combat, non life-threatening situations, as they did Iman.
More than 170 Palestinian children
were killed in 2004 alone
The orders are given to the soldiers orally so the senior command can escape responsibility in a trial situation, and so the account of what happened will be obfuscated.
At the same time, the Judge Advocate General (JAG) has decided to reduce the number of military police investigations into the killing of Palestinians.
In an interview with Aljazeera.net last year given on the condition of anonymity, an Israeli army reservist confirmed the accusations, saying the leniency of the punishment and lax enforcement of the law, create a situation in which Israeli military crimes go unpunished.
"If there is a trial, it will be only the soldier and the battalion commander. It's what they call 'discipline': The soldier hears out the commander and says to him 'Okay, sure', then spends seven days in prison and no one except the unit will know about it, including the press."
The source also spoke of a "code of silence" as well as other unwritten laws and behavioural norms that prevail throughout the military apparatus and aggravate the problem.
"I don't trust the system. It's hard, even when an investigation is open, to get to the truth," the officer said.