"I am happy to inform that Father Tom Uzhunnalil has been rescued," External Affairs Minister Sushma Swaraj Swaraj said in a tweet.
Father Uzhunnalil was abducted in March last year by Islamic State terrorists after they attacked the care home run by Mother Teresa's Missionaries of Charity. At least 15 people at the old-age home were killed in the attack.
It said Uzhunnalil thanked God and appreciated Oman's Sultan Qaboos bin Said. He also thanked his brothers and sisters and all relatives and friends who prayed for his safety and release.
Kerala Chief Minister Pinarayi Vijayan said that the release of Uzhunnalil was 'heartening'.
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"The intervention of Oman had paved the way for his release, I understand," he said in a Facebook post.
All help will be provided to enable him reach Kerala and for his further treatment, he added.
A video of Uzhunnalil had surfaced in December last year in which he appealed to the government to free him.
In the clip, Uzhunnalil was seen saying, "If I were a European priest, I would have been taken more seriously. I am from India. I am perhaps not considered of much value."
In July, Swaraj had taken up the the issue of Uzhunnalil's abduction with the Deputy Prime Minister of Yemen and requested him to secure the release of the priest.