Arroyo told reporters in Manila on Wednesday that Robert Tarongoy was "going home after a long time".
Tarongoy, an accountant for a Saudi company based in Baghdad, was captured on 1 November along with American Roy Hallums from their office in Baghdad after a gun battle killed an Iraqi guard and an attacker.
The fate of the American remains unknown.
A Nepalese worker and three Iraqis were also abducted but later freed.
"He is now in the hands of our Iraq crisis team. They're arranging how Robert Tarongoy can go home," the Philippine president said, adding that she had talked to him by phone.
The captors, who call themselves the Jaish al-Mujahadin, said they had released Tarongoy after Manila responded to its demands.
The group distributed a videotape showing the hostage standing between two kidnappers, reading a press statement in Arabic and English.
"He is now in the hands of our Iraq crisis team"
Gloria Macapagal Arroyo,
The release focused on a decision by the Philippines government to prevent its nationals from traveling to Iraq and Jaish al-Mujahadin added the statement had been issued by the Philippines Foreign Ministry.
Souring of ties
Arroyo also said Filipino officials led by Foreign Undersecretary Rafael Seguis have worked overtime to secure Tarongoy's freedom, which comes amid calls by the government for the estimated 6000 Filipino workers still in Iraq to return home.
The Philippines early last year pulled out its military contingent serving with US-led forces in Iraq after a Filipino truck driver was kidnapped.
The pullout caused a souring of ties between Manila and Washington.