Eight editors and directors of the Red Pepper were originally charged with treason and later with damaging the reputation of President Yoweri Museveni and others following the publication of a story alleging a Ugandan plot to overthrow the Rwandan government.
"After a meeting with President Museveni at State House, Entebbe Tuesday night, he pardoned the company directors and its senior editors and promised to immediately order the police to vacate Pepper Headquarters," the publisher said in a statement.
The statement added that the tabloid, which specialises in scurrilous gossip and political scoops, would "hit the streets again soon" after more than two months in limbo since a November police raid.
A presidential spokesman confirmed Tuesday's meeting saying the Red Pepper had been permitted to reopen after having "apologised to the nation".