Perth-based Suhail Ahmad Khan Durani was jailed for more than 18 months for assaulting a 19-year-old woman while examining her at Royal Perth Hospital's emergency ward in February 2010.
In May last year, the Administrative Appeals Tribunal (AAT) had allowed Durrani to retain his Australian visa despite his prison term.
Former immigration minister Tony Burke had overturned AAT's decision and Durani was held the day before September's federal election, The Australian reported.
He was released from the detention centre where he has spent the past 10 months and has had his visa reinstated, the report said.
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His lawyer Shahid Shakur said Durani's case- in the manner of 2007 detention of another Indian doctor Muhamed Haneef's - was "a most unfortunate example of misuse of power."
"Locking up people like Dr Haneef and Dr Durani, who held valid visas and were lawful non-citizens, not unlawful non-citizens, should be the exception to the rule," he said.
It had been a very tough time for the family, particularly trying to explain to his boy what was happening, he said.
"I've got no words. It's been a long journey," Durani added.
"I'm satisfied with the decision. I maintain my innocence but don't deny my conviction," he said.
Asked about returning to practising medicine - he said: "We'll take it step by step."
Immigration Minister Scott Morrison could appeal the decision in the High Court.
The cancellation of his visa was later overturned by a court and in 2010 he was awarded compensation.