Lieutenant Colonel Shrikant Purohit was released from Taloja jail in Navi Mumbai Wednesday morning.
He was escorted out by Army vehicles.
Col Purohit has spent close to nine years in jail.
He was given bail by the Supreme Court on Monday.
Purohit is accused of being involved in the 2006 Malegaon blasts.
Purohit is accused of pilfering the explosive used in the blasts from the army.
He is also accused of being a member of the right-wing Hindu group Abhinav Bharat.
Purohit's defence is that he is not a member of Abhinav Bharat but that he was infiltrating it, and that his superior officers were in the know.