Three foreign terror suspects being held without charge or trial have been granted bail.
Mr Abu Rideh had been held without trial at Broadmoor hospital
Mahmoud Abu Rideh, a Palestinian, was granted bail at a Special Immigration Appeal Commission hearing in London.
He had been detained at Broadmoor hospital after being moved from Belmarsh, and a decision is still to be made on his future mental health care.
The Home Office said the other two, who cannot be named for legal reasons, should be placed under house arrest.
Law Lords ruled in December that the anti-terror measures used to detain 12 men without trial were incompatible with European human rights laws.
In a written judgement on Monday, Siac judge Mr Justice Ouseley said Mr Abu Rideh had been granted bail because of a deterioration in his mental health.
Doctors had found that "Belmarsh had been severely damaging and that in Broadmoor the applicant's condition had been affected by the fact of indefinite detention without trial, subject to the regime of a high security hospital".
Mr Justice Ouseley said: "The longer the applicant was detained, the more dependent and institutionalised he became and 'deskilled' in coping in the community."
A Home Office spokesman said: "We will not seek to oppose bail for Mr Rideh but we will argue that the conditions imposed must be appropriate to address the threat that he poses.
"The Special Immigration Appeal Commission has stated that there will be a further hearing for the bail conditions to be finally determined."
The spokesman said that, as a result of this further hearing, Mr Abu Rideh would not be released on Monday.
The legal team of the other detainees, Algerians referred to as A and P, told Siac that the men would only want bail if they were not placed under house arrest.
Ben Emmerson QC, for the two men, said: "[House arrest] would be replacing one type of indefinite detention without trial with another."
Mr Emmerson said the men would be prepared to live at a named address, be tagged, live by a curfew and accept other restrictions, but could not accept house arrest.
But government lawyers said they would accept bail only if the men lived under house arrest, like a previously released detainee.
Last week the Tony Blair defended controversial plans to allow terror suspects to be placed under house arrest by ministers without their cases going to court.
Mr Abu Rideh was born in Jordan to Palestinian refugee parents.
He came to the UK in January 1995 and was recognised as a refugee.
However, in December 2001 he was detained under anti-terrorism laws accused of supporting and raising funds for international terrorist groups.
He was moved to Broadmoor in July 2002.
Amnesty International's Stephen Bowen said: "Bail conditions are obviously likely to be better than detention without trial but they are still likely to fall a long way short of fairness and basic human rights standards.
"Mr Abu Rideh should never have been subjected to indefinite detention in the first place and his mental health appears to have suffered as a result of these grossly unfair measures."