Rolando Del Torchio was picked up at a port on the remote island of Jolo, a stronghold of the Abu Sayyaf group, national police spokesman Wilben Mayor, told AFP.
The Abu Sayyaf is a small group of militants infamous for kidnapping foreigners and demanding huge ransoms.
Its leaders have in recent years pledged allegiance to the Islamic State group that controls vast swathes of Iraq and Syria.
It is believed to be currently holding nearly 20 other foreigners.
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"The... Team decided to bring the kidnap victim to the Trauma Centre (a local military hospital) where he will be taken care of by a military doctor," Mayor said.
Gunmen snatched Del Torchio, then 56, at gunpoint at his pizza restaurant on the city of Dipolog, about 400 kilometres northeast of Jolo, in October last year.
Del Torchio had worked as a missionary for the international organisation PIME in the south from 1998 before retiring in 2000 to set up his restaurant, colleagues told AFP shortly after he was abducted.
But authorities said they suspected he was taken by boat to the Abu Sayyaf.
"No further details as of this time," Mayor replied by text when asked which group had kidnapped Del Torchio and whether a ransom was paid for his release.
The Italian foreign ministry released a statement today confirming Del Torchio's freedom and thanking local authorities for their help.
"Italian national Rolando Del Torchio... Was released today and is currently in the custody of the Philippine authorities," the statement said.
"The foreign ministry thanks the Manila authorities for their excellent cooperation and commitment, which permitted the release of the Italian national."
It was a radical offshoot of a Muslim separatist insurgency in the southern Philippines that has claimed more than 100,000 lives since the 1970s.