Monday's clemency, hailed by relatives of the reformists as a step opening a new page in the ultra-conservative kingdom, came a week after Abdullah became monarch following the death of his half-brother King Fahd.
Abdullah also pardoned a number of Libyans accused of plotting to assassinate him, in a move that he hoped would help "close Arab ranks" - an apparent attempt to patch up troubled ties with Tripoli.
"King Abdullah has issued an order to pardon and release the detainees," namely the three reformists, their jailed lawyer and an Islamist activist, Prince Nayef was quoted as saying.
The statement said the five included Ali al-Demaini, Abdullah al-Hamed and Matruk al-Faleh, who are serving nine, seven and six years in jail respectively for "stirring up sedition and disobeying the ruler".
Earlier on Monday, Demaini's wife said the three reformists may be freed on Tuesday.
"We expect them to be freed tomorrow"
Ali al-Demaini's wife
"I have been informed by a Saudi official that there has been an order for a pardon for my husband and his two companions," said Fawziya al-Oyouni.
"We expect them to be freed tomorrow," she said.
Al-Hamed's brother, Issa Hamed, said: "King Abdullah is the pioneer of reform and he has opened a new page in the country by pardoning the three reformists and their lawyer."
Al-Demaini, al-Hamed and al-Faleh were among a dozen activists arrested in March 2004 on charges of demanding a constitutional monarchy. The others were released after pledging to no longer lobby publicly for reform.
The trio were accused of using Western terminology in demanding reforms. They also allegedly questioned the king's role as head of the judiciary.
Their arrest and sentencing have been criticised by the United States and human rights groups.
The crackdown on pro-democracy activists has cast a shadow over the Saudi government's moves to introduce limited reforms, including recent male-only elections.
Abdullah also pardoned Saudi lawyer Abdulrahman al-Lahem, a member of the defence team of the three reformists who was detained after criticising judicial practices during the trial of the trio.
Saeed bin Zueir was jailed for
Prince Nayef said the king had also pardoned Islamist Saeed bin Zueir, who was serving a five-year sentence for justifying violent acts in the kingdom.
Bin Zueir, a Saudi Islamist and former professor of mass communications in Saudi Arabia, was arrested in April 2004.
The Saudi Interior Ministry said at the time that bin Zueir had been detained because of remarks "in which he backed the terrorist acts in Riyadh which targeted Muslims and non-Muslims residing" in the kingdom.
He was detained after appearing on Aljazeera during a debate on an audiotape purporting to be of Saudi-born Osama bin Laden.