The JuD head, who carries a bounty of USD 10 million announced by the US for his role in terror activities, has been under detention since January this year.
The Judicial Review Board of Punjab province comprising judges of the Lahore High Court yesterday unanimously ordered Saeed's release on the completion of his 30-day house arrest which expired tonight.
"We are happy to see our leader free," a JuD spokesman Ahmad Nadim told PTI.
"Saeed has been freed as the Punjab government decided not to detain him further in any other case," a top official in the government told PTI.
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He said after a long deliberation by the officials concerned it has been decided to follow the review board's decision.
Official sources said that Saeed's release would invite strong criticism from India and the US.
Several JuD activists gathered outside Saeed's residence in Jauhar town in Lahore to celebrate his release.
The board refused to give further extension to the detention of Saeed's aides. They were set free last month.
Under the law, the government can detain a person for up to three months under different charges but for extension to that detention it needs approval from a judicial review board.
Saeed was put under house arrest after the Mumbai terror attack in November 2008 but he was freed by court in 2009.
India has repeatedly asked Pakistan to re-investigate the Mumbai terror attack case and also demanded trial of Saeed and Lashkar-e-Taiba operations commander Zakiur Rehman Lakhvi in the light of evidence it had provided to Islamabad.
Ten LeT militants killed 166 people and wounded dozens in Mumbai in November, 2008. Nine of the attackers were killed by police while lone survivor Ajmal Kasab was caught.
Saeed was declared a global terrorist by the US and the UN over his alleged role in the attack.