Up to 40,000 suspects are being freed on bail and the government insists they will still face trial.
"
Do you expect me to live in peace when I will be forced to see on a daily basis someone who killed my parents?
"
Uwera Immaculate
Genocide survivor
But some survivors of the 1994 genocide are unhappy at their release, saying they could intimidate witnesses.
An estimated 800,000 people, mostly ethnic Tutsis and moderate Hutus, were killed in 100 days between April and June 1994.
The BBC's Helen Vesperini in Kigali said that she saw some 230 people, who were either elderly or seriously ill being set free.
Not ringleaders
Justice Minister Jean de Dieu Mucyo said that up to 2,000 people would be freed on Friday.
Rwanda's prisons are currently massively overcrowded with some 120,000 people awaiting trial for genocide.
MASS RELEASE
Our correspondent says that 90% of Rwanda's prisoners are genocide suspects.
Those being released must have confessed to their crimes and already served longer in prison than the maximum sentences for their offences.
They are not the alleged ringleaders of the genocide.
Or they are either seriously ill, over 70 years old or were under 18 when the crimes were committed.
'Impossible'
In another attempt to reduce prison overcrowding, the government is using the traditional "Gacaca" justice system, where local communities judge suspects.
Genocide survivors group Ibuka has warned that some people might be traumatised by seeing those who had killed their relatives walk free.
"It is of course something absurd," said Uwera Immaculate, a Rwandan Tutsi genocide survivor living in the capital Kigali.
"Do you expect me to live in peace when I will be forced to see on a daily basis someone who killed my parents?"
The government has promised to provide extra counsellors for genocide survivors.
Prosecutor-general, Gerald Gahima said that the move, however unpopular, had been necessary for logistical reasons.
"It is impossible to try hundreds of thousands of people through ordinary courts," he told the BBC's Network Africa programme.
"We estimate that if a million people died, another million or two million people had a role in what happened. It would be impossible to try and punish all these people," he said.
The release is scheduled to be over by the end of the month, meaning that an average of 2,000 people will be released each day for the next 20 days.