Citing the deterioration of the 60-year-old activist's health, an appeals court judge in the capital Baku ordered the "release (of) Arif Yunus from custody on the pledge (he) not to leave the country," an AFP journalist reported from the courtroom.
But the court did not address the fate of his ailing 59-year-old wife Leyla Yunus, who is Azerbaijan's top rights campaigner.
She was jailed in August for eight-and-a-half years on charges that include fraud and tax evasion. Her husband was sentenced to seven years in prison on similar charges.
Speaking outside the court, Yunus pledged to do everything to secure the release of his wife.
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"I will not keep silent, I will be struggling until Leyla is also set free," he said, claiming that his wife was "tortured" in prison.
His wife had said earlier that she was severely beaten in custody by prison guards.
International rights groups have slammed the prosecution of the couple as an attempt by Azerbaijan's iron-fisted authorities to prevent them from continuing their work.
Dissent in tightly-controlled Azerbaijan is usually met with a tough government response.
Rights groups say the government of the oil-rich ex-Soviet republic has stepped up pressure on opponents since strongman President Ilham Aliyev's re-election for a third term in 2013.