Hundreds of Palestinians demonstrated in Nablus against factional violence that has been raging between Fatah, headed by Mahmoud Abbas, the Palestinian president, and the ruling Hamas movement in Gaza.
Armed men had opened fire at al-Hanbali's car at a petrol station in the centre of the city before capturing him.
In the videotape released to media organisations, one of the captors read a statement warning that the group would retaliate for what he has called "the crimes committed against the Fatahawis [members of Fatah] in Gaza".
"For any crime that takes place against one of our people in Gaza, there will be an operation in West Bank and we will not exclude anybody from this decision".
The release of al-Hanbali comes a day after Jaime Razuri, a Peruvian AFP photographer, was freed in the Gaza Strip six days after he was abducted outside the AFP offices in Gaza City by masked men.
Coinciding with al-Hanbali's release, about 40 Fatah fighters set fire to shops, allegedly belonging to Hamas-affliiated individuals, in central Ramallah.
In the town of el-Bireh, outside Ramallah, Fatah loyalists also fired shots at the house of the Hamas-allied mayor.
The feud between Fatah and Hamas has claimed more than 30 Palestinian lives since the beginning of December.
"The executive force is illegal... and will be treated as such if it is not immediately integrated"
Mahmoud Abbas, Palestinian president
Most of the violence has been in Gaza, a Hamas stronghold, but has recently begun spreading to the West Bank, where Fatah is dominant.
Abbas and the Hamas movement faced off over Hamas' "executive force", sparking fears that factional tensions could again erupt into deadly violence.
Abbas has demanded that Hamas disband its interior ministry force, saying they were illegal and should be incorporated into existing security structures.
"The executive force is illegal... and will be treated as such if it is not immediately integrated... into legal security services as stipulated by basic law," said a statement from the president.
However, Ismail Haniya, the Palestinian prime minister, said that "it is not true that the executive force is outside of the security services".
"It works legally according to the orders of the interior ministry."