It is not clear if Mr Tahir will be able to leave the country
The Malaysian government says it has released an alleged middleman in the nuclear secrets ring run by disgraced Pakistani scientist AQ Khan.
Buhary Syed Abu Tahir, a Sri Lankan businessman, was arrested in Kuala Lumpur in May 2004.
US President George W Bush described him as AQ Khan's "chief financial officer and money launderer".
Malaysia's home minister said that Mr Tahir was no longer a threat to national security.
"Four years he has been inside, I think we have investigated what we need to investigate," Home Minister Syed Hamid Albar said.
Khan was pardoned by Pakistan's President Musharraf for his role
However, he told reporters that Mr Tahir would remain under police watch.
Media reports in Malaysia say Mr Tahir was released on 6 June but will have to report to the police every week.
He was held in a detention camp in northern Malaysia. It is not clear if Mr Tahir, who is married to a Malaysian, will be allowed to leave the country.
In the months before his arrest, he allegedly told Malaysian investigators that Dr Khan had sent enriched uranium to Libya and that Iran had paid Dr Khan $3m for used centrifuge parts in the mid-1990s.
A firm controlled by the son of Malaysian Prime Minister Abdullah Badawi was also investigated for allegedly supplying Libya's nuclear weapons programme but cleared of wrongdoing.
Dr Khan was pardoned by Pakistan's President Pervez Musharraf after admitting illegally transferring nuclear secrets to other countries including Libya, Iran and North Korea.
In recent weeks he has retracted his confession.