They said on Monday that Pham Hong Son, 37, a medical doctor, has served more than four years on a conviction of spying after he translated an article on democracy from a US government website and posted it online.
The one-party state sentenced him to 13 years in 2003, which was reduced to five on appeal.
The release of Pham was part of this week's annual presidential amnesty to mark National Day on September 2 when the Communist party-ruled country celebrates independence from French colonial rule.
Vietnamese officials confirmed Pham's release, saying he would serve three years of "administrative surveillance", which would include travel restrictions from his Hanoi home.
Some diplomats said they were told that a Protestant deacon, Ma Van Bay, was among 5,313 prisoners released under the amnesty, but the government could not immediately confirm this.
"Pham Hong Son and his family made an application for amnesty and clemency and amnesty has been decided for him on this occasion," Nguyen Van Vich, vice-chairman of the president's office, told reporters.
Those released included inmates held for a variety of offences.
Diplomats said Vietnam was responding to international pressure to improve its record on religious freedom and human rights as the country prepares to join the World Trade Organisation this year and host the Asia-Pacific Economic Co-operation forum summit in November.
The government said apart from Son, one other inmate convicted of a "national security crime" would be released.
He was identified as Y Oal Nie of the E-de minority and a farmer in the Central Highlands, where police and demonstrators clashed in April 2004 over land and religious rights.
The United States, the European Union and groups such as Human Rights Watch and Reporters Without Borders have all petitioned Hanoi to release Son and a score of others they described as political or religious activists.
Vietnamese officials said six foreign nationals were included in the amnesty - two citizens of China, one from Canada, one from the United States and one each from the Netherlands and Taiwan.