"We have just observed the return of the 12 forestry workers... In the village of Kolling" yesterday, the source in the town of Kolda told AFP, requesting anonymity.
The kidnappers freed them in the Yassine forest, the source added, saying he had no more details on the conditions of their release.
They had at first demanded 10 million CFA francs ( USD 17,000 ) from the sawmill where the loggers work before eventually lowering the ransom to just 700,000 francs, an army source said on Friday.
Casamance has been the cradle of a low-level separatist insurgency since 1982, but there appeared to be no political motive for the kidnapping.
The unrest in Casamance, a strip of land separated from the rest of Senegal by Gambia, has claimed thousands of lives, although it has been less intense in recent years.