The MQM said in a statement tonight in Karachi that the police had remove bail conditions for 61-year-old Hussain and two other party leaders - Muhammad Anwar and Tariq Mir.
MQM sources said the police informed the three men that "there is no need for any of you to attend the police station. The bail conditions currently in place are therefore removed."
The police notice stated that "at the time of writing there is insufficient evidence to bring a criminal charge", according to the MQM statement.
The MQM chief, who has lived in and led the party from the UK since 1991, said he was "relieved".
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Hussain's bail was extended for a fifth time on October 5, 2015 and he was due to appear at a South London police station today as part of the ongoing investigations when the police informed him bail conditions had been removed.
The sources said that the cancellation of police bail meant that there would be no restriction on Hussain's international travel and he would not be bound to appear before investigators until they got any fresh evidence.