Khalid al-Masri was held in secret at an Afghani prison, nicknamed the Salt Pit, for three months while Central Intelligence Agency (CIA) agents considered what to do with him until Condoleezza Rice, who was then national security adviser to President George Bush, ordered him set free.
Al-Masri's case highlights the highly controversial practice of so-called rendition used by US officials to capture people they suspect of terrorism and jail them in countries where their treatment is unconstrained by US laws.
NBC News said on Thursday night that Macedonian authorities first detained al-Masri in late December 2002, because his name matched someone who had trained in an al-Qaida camp and he had a fake passport.
The Macedonians contacted the CIA and al-Masri said he was kidnapped and flown by US officials to Afghanistan where he was kept in harsh conditions until his release in late May 2004.
The report said CIA officials in Kabul in February suspected
al-Masri was the wrong man, and that in March the CIA determined that his passport was not fake and he was an innocent person.
In April, sources told NBC, then CIA Director George Tenet was briefed of al-Masri's situation and said he should be released from prison.
However, it took another month and two direct orders, two weeks apart, from Rice before al-Masri was finally set free in late May.
"It's very deeply troublesome," CIA general counsel Jeffrey Smith told NBC News when he was told al-Masri's story. He said the German should not have been kept in jail when it became clear he was innocent.
"It's wrong morally, it's wrong legally, and it violates the basic principles of the United States," the CIA official added.