After keeping the two middle-aged Swedes in custody overnight, investigators said there was not enough evidence to keep them in jail on suspicion of plotting sabotage.
Prosecutor Gunilla Ohlin said: "There was no reason to keep them under arrest anymore, but the suspicions against them remain."
She said investigators were awaiting the results of an analysis of the substance, believed to be to be triacetone triperoxide, or TATP, an explosive that was used in the 2005 London transit bombings.
Police did not release the suspects' identities, saying only that one was born in 1955 and the other in 1962 and both were Swedish citizens from the city of Norrkoping.
Sven-Erik Karlsson, a police spokesman, said that they were no longer considered a threat to the nuclear plant, but declined to elaborate.
He added it was still unclear how traces of the explosive ended up on the handle of the plastic bag that one of the suspects was carrying.
"He can't explain it and no other explanations have emerged either," Karlsson said.
TATP is made by mixing chemicals used in common household items, including hydrogen peroxide and paint thinner.
The Oskarshamn generating station, provides about 10 per cent of Sweden's electricity.
The two suspects had been performing maintenance work on the second reactor, O2, which was shut down for an annual review on May 11.
Anders Osterberg, a plant spokesman, said it could not be ruled out that the men had also accessed the O1 reactor, so it was shut down Wednesday for inspections.
The third reactor remained in operation.