Arroyo granted her predecessor a pardon on Thursday six weeks after he was convicted by the Philippines special graft court of plunder.
Ronaldo Puno, the interior secretary, told a local radio station Arroyo had "agonised over the decision".
"But she felt in the end that her decision was the right one," he said. "I thank God for enlightening the mind and conscience of Mrs Arroyo."
|Critics say Arroyo's pardon is designed |
to curry favour with her opponents [EPA]
Estrada was thrown out of office in 2001 and has been under house arrest for most of the last six years in a luxurious villa outside Manila.
After his release on Friday, he is expected to attend a rally of his supporters at his political base in San Juan.
His supporters, who view Arroyo as a traitor for turning against Estrada before being sworn in as his successor, welcomed news of the pardon.
"Before we are angry at her but now no more because she let Estrada go free," said one woman.
As news of Arroyo's decision spread, hundreds of Estrada's supporters mostly from the disenfranchised urban poor made their way to his villa for a glimpse of the man many consider a hero.
"We want to see the president before he leaves," said Erlinda Esteban, a poor 71 year-old farmer who walked for an hour hoping to see Estrada.
Another supporter, Leticia Diocera, said: "He has been our idol since he was an actor and he is a good man."
Critics however see the clemency as a political move amid mounting bribery scandals against the present government, and accused Arroyo of damaging the country's credibility by issuing the pardon.
|Estrada has seen his support levels |
grow among urban poor Filipinos [AFP]
"She is sending the message that, once again, political expediency trumps political uncertainty and the pursuit of justice," said the Philippine Daily Inquirer.
"Does anyone doubt that the pardon is really meant, not to save Estrada's skin, but hers?"
Our correspondent in Manila Marga Ortigas says the pardon comes at a tough time for the president who faces a series of allegations eroding the credibility of her government and renewed calls for her impeachment.
Our correspondent says that although Arroyo claims to have granted a pardon to Estrada in the spirit of national unification, many Filipinos see the move as another sign of weakness in her rule.
Estrada's son, Senator Jinggoy Estrada, said he wanted to thank Arroyo for granting the pardon, but he brushed aside suggestions that the move would deter the opposition from pursuing accusations of bribery and kickbacks in her administration.
"As a senator I will continue to do my duty," he said. "If there are anomalies in this government, I will continue to expose it."