Barack Obama, the US president, described the release as a "mistake" and said that al-Megrahi should be placed under house arrest on his return.
Al-Megrahi returned to Libya after boarding a plane at Prestwick airport in Glasgow, Scotland.
He was earlier released from Greenock prison and escorted by a police convoy to the airport.
In a statement following his release, al-Megrahi said: "I am obviously very relieved to be leaving my prison cell at last and returning to Libya, my homeland.
"The remaining days of my life are being lived under the shadow of the wrongness of my conviction.
"I have been faced with an appalling choice: to risk dying in prison in the hope that my name is cleared posthumously or to return home still carrying the weight of the guilty verdict, which will never now be lifted.
"The choice which I made is a matter of sorrow, disappointment and anger, which I fear I will never overcome."
'Going to die'
Amr El-Kahky, Al Jazeera's correspondent in Tripoli, the Liban capital, said Libyans were "triumphant" at his return.
"Al-Megrahi's mother said she has her home door open, because she won't believe that he is free unless she sees him for herself," he said local press had reported.
MacAskill ruled out allowing al-Megrahi to live in Scotland due to security concerns.
"Al-Megrahi now faces a sentence imposed by a higher power," MacAskill said. "It is one that no court in any jurisdiction could revoke or overrule. It is terminal, final and irrevocable. He is going to die."
MacAskill said the decision was made because Scottish law required that "justice be served, but mercy be shown".
The US said it "deeply regrets" the decision made by the Scottish executive, in a statement made by the White House.
|Al-Megrahi has been serving his sentence in Greenock prison in Scotland [GALLO/GETTY]
"As we have expressed repeatedly to officials of the government of the United Kingdom and to Scottish authorities, we continue to believe that Megrahi should serve out his sentence in Scotland," it said.
Nick Spicer, Al Jazeera's correspondent in Washington DC, said the US government had been writing to British leaders to try to influence the decision.
"But Scottish justice is sovereign, and it is recognised that the US cannot change the outcome of the decision by the Scottish justice minister," he said.
Speaking to Al Jazeera, Omar Turbi, an expert in US-Libyan relations, said: "I think it [the release] really represents a dilemma for the Libyans.
"Will they move forward in their history and time, thinking 'OK, we want the world to think that we took revenge over America's bombing of Tripoli in 1986, or shall we really take this stigma out of the world's view of us and clear it once and for all'.
"Libya is going to live with this stigma forever if it does not take a proactive step to clear its name."
The Libyan government had appealed to the court to consider a prisoner transfer or release on compassionate grounds for al-Megrahi.
MacAskill rejected the application for a prisoner transfer, stating the US government believed there was an agreement to keep anyone convicted over the Lockerbie bombing imprisoned in Scotland.
Frank Duggan, the president of US Victims of Pan Am 103, told Al Jazeera he was "disappointed" that Britain's government did not make discussions over the terms of al-Megrahi's imprisonment clear.
"Mr MacAskill said the British government said it had no obligation to honour its agreement that the prisoner would serve his term in Scotland. They said they gave no such assurances to the US government and that's just not true," he said.
"It is clear that the agreement was made that he would spend his entire term, the rest of his life, in Scotland."
Al-Megrahi's release comes days after he dropped his second appeal against his conviction, a condition necessary for the applications to be considered.
Al-Megrahi, who has repeatedly protested his innocence, lost an appeal in 2002 and last year failed to secure his release on the grounds he was dying.
However, there is a fear that, unless a public inquiry into Lockerbie is held, evidence that would have come to light at al-Megrahi's appeal will never be publicly known.
His lawyers began an appeal in May this year against his conviction at a court in Edinburgh, saying the case against him was flawed.
The attack, which occured on December 21 1988, killed all 259 people on board and 11 on the ground when it crashed into the town of Lockerbie.
Four years after al-Megrahi's conviction in 2001, Libya accepted responsibility for the bombing and agreed to pay about $2.7bn in compensation to the families of those killed.
That move prompted the lifting of international sanctions against Libya and led to a restoration in diplomatic ties between Tripoli and the West.