However, Panahi is out on bail and his case will be reviewed in March, so the release could just be temporary, according to several sources.
The director was released two days after announcing that he was going on a hunger strike to protest still being incarcerated after Iran's Supreme Court had in last October overturned a six-year sentence issued against him in 2010 for "propaganda against the system", 'Variety' reported.
That sentence had become obsolete due to the country's 10-year statute of limitations. But the directors' wife and lawyers said that Iranian security services were forcing the judiciary to keep Panahi behind bars.
"Although I am happy about Panahi's release, it must be said that it should have taken place three months ago," the director's lawyer, Saleh Nikbakht, said in a statement, which has been accessed by 'Variety'.
He noted that Panahi should have been released on bail on October 18 last year, the day his sentence was overturned.
As per 'Variety', Panahi, 62, is considered one of Iranian cinema's greatest living masters.
He is known globally for prize-winning works such as 'The Circle', 'Offside', 'This is Not a Film', 'Taxi', and most recently, 'No Bears', winner of last year's Special Jury Prize at the Venice International Film Festival.
The Berlin Film Festival, which awarded 'Taxi' a Golden Bear prize in 2015, immediately issued a statement to express joy that Panahi has been freed.
"We were very concerned for the health of Jafar Panahi and are now very glad that he has finally been released," directors Mariette Rissenbeek and Carlo Chatrian said.
The director was arrested last July from Tehran in the wake of the country's conservative government crackdown.
Los Angeles, Feb. 4 (IANS)