The 85-year-old ailing ex-President was taken from Cairo's Tora prison by a medical helicopter to the Maadi military hospital in the city's suburbs where he will be kept under house arrest.
His release comes after a Cairo court yesterday ordered authorities to free him.
A small crowd of supporters gathered outside the prison and cheered as the helicopter took off.
Mubarak's release was met with indifference from many Egyptians, who are more focused on the country's recent political crisis and last week's massacre of supporters of deposed President Mohammed Morsi.
Mubarak still faces a retrial on charges of killing of over 800 protesters during the 2011 revolution, and three other corruption cases as well.
But he has already spent more than two years in pre-trial detention, the maximum allowed under Egyptian law, and so the courts have ruled him eligible for release pending trial.
Mubarak was convicted last year of involvement in the murder of the protesters during the uprising that ended his nearly three decade-long rule, and sentenced to life in prison, but was granted a retrial in January. His next hearing is scheduled for August 25.
Hazem el-Beblawi, the prime minister, said last night that Mubarak would be placed under house arrest following his release.
The decision to place him under house arrest is possible under the current state of emergency which has been imposed since August 14 following widespread violence after the army ousted Morsi on July 3.
The street clashes between the protesters and the security forces have left nearly 900 people dead.
Wednesday’s Cairo court ruling ordering his release concerns the "Ahram gifts" case, in which Mubarak allegedly accepted USD 11 million worth of gifts, including jewelry and watches, from the state-run newspaper Al-Ahram.
He has already repaid the amount of the gifts, and the other defendants in the case have been released, suggesting that the charges against Mubarak could eventually be dropped.
Mubarak also faces charges of embezzling money from a fund earmarked for presidential palace renovations. A judge working on this case ordered his release on Monday, on the same procedural grounds. A separate charge accuses him of "illicit gains" during his presidency.
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