The families of the victims of the RAF, also known as the Baader-Meinhof Gang, have opposed the release, partly because she has never expressed remorse over the murders.
The RAF's campaign reached its peak in 1977 when they kidnapped and killed Hanns-Martin Schleyer, a leading industrialist and former Nazi, and hijacked a plane with the help of Palestinian fighters.
Mohnhaupt was arrested in 1982 and convicted of involvement in nine murders, including those of Schleyer and Siegfried Buback, the West German chief federal prosecutor, and Juergen Ponto head of the Dresdner Bank.
She was given five life sentences for murder.
Mohnhaupt shot Ponto three times when he resisted a kidnapping attempt in 1977, according to her conviction.
She was also convicted of involvement in planning killings and attacks - including a 1981 rocket-propelled grenade attack on the car of US General Frederick Kroesen, then the commander of US forces in Europe.
Both the general and his wife were injured.