Police cited poor health and remorse for releasing Xiang Nanfu, a 62-year-old contributor to the US-based Chinese-language news website Boxun.Com.
Xiang was among dozens of people detained in May, in the weeks leading up to the 25th anniversary of the pro-democracy student protests that ended in a bloody military crackdown in Beijing on the night of June 3, 1989.
Many of those detained have been released, but a few remain in police custody, including outspoken journalist Gao Yu and prominent rights lawyer Pu Zhiqiang.
Chinese police said Xiang fed Boxun false stories about authorities harvesting organs and burying people alive in order to incite public dissatisfaction against the government. Xiang admitted on state broadcaster China Central Television that he made things up, although he did not elaborate.
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The founder of Boxun.Com, Watson Meng, has denied the site reported that organ harvesting or burying people alive had occurred. Rather, he said, an April report described petitioners who made such allegations in front of the Beijing office of the United Nations.
Boxun issued a statement welcoming Xiang's release, but said Xiang should be constitutionally protected for his acts to give a voice to wronged members of the public.
Boxun denied that it posts instigative reports.
"It is beyond the ability of Boxun.Com, which is banned in mainland China, to incite any dissatisfaction by the public against the government," the statement said.