It was the first time the Philippines had martial law imposed since Ferdinand Marcos, the late former president, clamped it nationwide more than 30 years ago and governed by decree until he was overthrown in 1986.
The Ampatuans, allies of Arroyo and in control of Maguindanao for years, have denied involvement in the massacre but the ruling party expelled them days after the killings.
Elsewhere in the south, authorities sought the help of a tribal chieftain to persuade government-armed former militiamen to release 47 hostages, even as police prepared a rescue operation.
The massacre and the abduction have underscored the lawlessness in a volatile region plagued by bandits, Muslim and communist fighters and private armies.
Eduardo Ermita, a senior cabinet member who also serves as executive secretary, said a state of emergency declared a day after the massacre in Maguindanao would remain in force in the region.
It allows security forces to set up road checkpoints and seize firearms from civilians.
The decision to lift martial law was made upon the recommendation of cabinet security officials during a meeting of the National Security Council early on Saturday, Ermita said.
He said 24 people, including clan patriarch Andal Ampatuan Sr, have been charged with rebellion and 638 others have been referred to the justice department for investigation.
Three others, including Ampatuan's son, Andal Jr, have been charged with multiple counts of murder and 247 others face similar charges.
The military has seized hundreds of assorted firearms, including mortars and machine guns, and hundreds of thousands of ammunition rounds hidden or buried in and near properties owned by the Ampatuans.
Human rights groups and lawyers had questioned the constitutionality of Arroyo's imposition of martial law - mindful of rights abuses during the Marcos administration.
They said that actual rebellion and invasion - the grounds for martial law - did not exist.
Opposition legislators had accused Arroyo of preparing the grounds for imposing it nationwide.