Okke Ornstein was freed shortly after President Juan Carlos Varela signed a decree cutting his sentence and those of 310 other detainees, and granting conditional release to 65 others, his lawyer told AFP.
Ornstein was arrested on arrival in Panama, where he lives, a month ago. He was serving a 20-month sentence for defamation cases lodged in 2011 and 2012 over articles he had written on his blog.
In a statement, the Panamanian government acknowledged that the journalist's detention was singled out for concern by rights groups and media watchdogs.
His lawyer, Manuel Succari, said that for the moment Ornstein would stay, along with his daughter.