A foreign ministry spokesman said the decision showed the Pakistani authorities were not serious in pursuing charges against Maulana Masood Azhar.
"
It is quite clear that investigation and charges against
Maulana Masood Azhar have not been pursued by the Pakistani
authorities with any seriousness
"
Indian foreign ministry spokesman Navtej
Sarna
The group he leads, Jaish-e-Mohammad, is accused of a string of deadly attacks on Indian targets, including one on parliament in Delhi a year ago on Friday.
Azhar was detained shortly after that attack, but the Lahore High Court said there were insufficient grounds to keep him under house arrest without charge any longer.
It ordered his immediate release.
"
I am a peace-loving person, and just want to preach
Islam
"
Maulana Masood Azhar, Jaish leader
He is the second militant leader to be released in Pakistan in under a month.
Delhi was outraged in November when the founder and former leader of Lashkar-e-Toiba, also blamed in the parliament attack, was freed in similar circumstances.
The parliament attack, which Pakistan condemned and denied any involvement in, brought the nuclear-armed neighbours to the brink of war.
International pressure has helped ease tensions in recent months.
'God is great'
Maulana Masood Azhar has been involved in the fight to oust India from Kashmir for more than a decade.
He was brought amid high security to the court in Lahore, where hundreds of supporters greeted him with shouts of "God is great".
During a brief appearance before judges, he said he was innocent and should be freed.
"I am a peace-loving person, and just want to preach Islam," he said.
Correspondents say they expect a police guard on his house in the Punjabi city of Bahawalpur to be lifted later on Saturday.
Hijack
Azhar spent time in Indian custody, but was released three years ago in exchange for passengers on a hijacked Indian Airlines jet.
Two others were also set free at the time - Omar Sheikh, since convicted in Pakistan of murdering Wall Street Journal reporter Daniel Pearl, and another militant, Mushtaq Ahmed Zargar.
All three are on India's most wanted list of 20 people it accuses of terrorism.
Jaish-e-Mohammad and Lashkar-e-Toiba were among five groups banned by Pakistan after the parliament attack.
None of the leaders arrested were charged with any unlawful activity, and most have since been freed on court orders.
The five parliament gunmen shot dead nine people before they themselves were killed.
Four others were subsequently arrested and charged with aiding the gunmen.
Their case is still being heard by a special court in Delhi, with a judgement expected on Monday.