Pakistani President Pervez Musharraf has pardoned the disgraced founder of the country's nuclear programme.
Khan is widely seen in Pakistan as a hero for his nuclear work
Abdul Qadeer Khan stunned the nation when he confessed on television to leaking nuclear weapons secrets to Iran, Libya and North Korea.
"You cannot shield a hero and damage the nation," the president said.
The head of the UN's atomic agency, Mohamed ElBaradei, described Mr Khan's revelations as just the "tip of the iceberg" of illegal trafficking.
But General Musharraf said Pakistan would not hand over any documents to the International Atomic Energy Agency (IAEA) or allow the United Nations to supervise Pakistan's nuclear programme.
The nuclear scientist, a national hero, made his public confession on Wednesday after meeting General Musharraf.
Mr Khan told the nation he had acted without authorisation and begged forgiveness.
General Musharraf announced his final decision at a news conference following his cabinet's recommendation to grant clemency to the scientist.
He said he had tried to balance Pakistan's domestic interests and international demands that proliferation activities be brought to light.
"Whatever I have done, I have tried to shield him," Mr Musharraf said.
But "one has to balance between international requirements and shielding".
Speaking to the BBC, a spokesman for Pakistan's Foreign Ministry, Masood Khan, denied the decision was lenient, saying Mr Khan had "made a contribution to Pakistan's nuclear programme".
Correspondents say there was huge public opposition to putting him on trial.
They say pardoning him avoids the potential embarrassment that could result from a public prosecution - even though it could spark allegations of a cover-up.
The BBC's Jim Fish says experts are deeply sceptical that Mr Khan's alleged proliferation network could have spread so far without the complicity of some in the government.
Raza Rabbani, a former government minister and acting secretary-general of Benazir Bhutto's opposition Pakistan People's Party, demanded more information about Mr Khan's activities.
Khan said Musharraf was not to blame
The secret network may not have been government-sponsored, he said, but "one could say maybe the ambit is slightly larger than a single individual.
"That is why the opposition in Pakistan and particularly the People's Party has been demanding that there be a parliamentary inquiry into this whole episode," he told the BBC.
But Mr Musharraf said no independent inquiry would be allowed.
Mr ElBaradei - the head of the UN's International Atomic Energy Agency - told reporters Mr Khan was "just the tip of the iceberg for us".
He said Mr Khan was "not working alone".
Later, an IAEA spokeswoman told the BBC urgent work was needed to cut off the so-called "end-users" of proliferated weapons information.
Pakistan began an inquiry into possible illegal transfers late last year after the UN passed on information it had gathered about Iran and Libya's nuclear programmes.
Officials say Mr Khan ran a network that systematically smuggled nuclear equipment to third countries using chartered planes.
They say the network shared secret designs for centrifuges capable of producing weapons-grade uranium.
Mr Khan, it is alleged, also secretly travelled abroad to explain to Iranian, Libyan and North Korean scientists how to make nuclear bombs.
More than 15 people from the nuclear enrichment facility that Mr Khan used to run, Khan Research Laboratories (KRL), are still being questioned in the nuclear transfers investigation.
Their relatives say they are innocent.
Washington, which pressed Islamabad to investigate the suspected nuclear proliferation, may now exhort it to join the nuclear Non-Proliferation Treaty, say correspondents.