Released overnight by the Lahore High Court, Hafiz Mohammed Saeed led Friday prayers at Al-Qudsia mosque in Lahore, according to Habibullah Salafi, a spokesman for the Jamaat-ud-Dawa, or JuD, Saeed's organization.
News footage showed Saeed celebrating with his exultant supporters. The United States and India issued statements critical of the decision for him to go free, but Pakistan defended its fight against terrorism and condemned India's response.
"First of all I thank God who has given me an honorable release. Three judges of the High Court gave the decision. Praise be to God, it is a matter of great happiness for me that nothing has been proved against me which could be detrimental for me or for Pakistan. Thank God, we have been vindicated," Saeed said.
Both India and the United States accuse Saeed of being responsible for the deadly attacks that struck locations across Mumbai nearly a decade ago.
But he has repeatedly denied involvement in the Mumbai killings or support for terrorist activities.
In late November nine years ago, gunmen went on a three-day rampage in the Indian city, using automatic weapons and grenades to strike hotels, a cafe, a railway station, a movie theater, a hospital and a Jewish center
. The violence resulted in at least 164 deaths.
Under house arrest since January
Saeed had been under house arrest since January after being detained in Pakistan's Punjab province.
The arrests of Saeed and four others came in conjunction with placing JuD and another group, the Falah-e-Insaniat Foundation, on a watch list under Pakistan's Anti-Terrorism Act of 1997
The men were detained for being active members of the organizations and were held under a part of the Anti-Terrorism Act that gives Pakistan's government the power to arrest or detain suspects for up to 12 months.
Malik Muhammad Ahmad Khan, a spokesman for the Punjab provincial government, said, "After court orders, Hafiz Saeed was released from house arrest early morning today; he is no longer under house arrest. It is yet to be decided if the government will appeal the court's decision."
said, "I believe that this is not a personal issue, it is an issue involving my country. India has always accused me of terrorism; it lobbied and tried to convince the world. But the High Court decision has proved that India's allegations are all fabricated and based on hatred for Islam."
Supporters outside Saaed's house chanted "God willing," "God is the greatest" and "India, your death is at hand."
US offers $10 million bounty
The United States
, which labels Saeed a leader of the Pakistan-based militant group Lashkar-e-Tayyiba, said it is "deeply concerned" about his release. That group is widely thought to have been behind the Mumbai attacks that also killed six Americans.
Lashkar-e-Tayyiba "is a designated Foreign Terrorist Organization responsible for the death of hundreds of innocent civilians in terrorist attacks, including a number of American citizens. The Pakistani government should make sure that he is arrested and charged for his crimes," US State Department spokeswoman Heather Nauert said.
According to the UN Security Council, Saeed's JuD organization is synonymous with the terrorist group and supportive of al Qaeda and the Taliban.
The State Department describes JuD's mission as the establishment of Islamist rule in India and Pakistan and is offering as much as $10 million for any information that might lead to his arrest or conviction.
Raveesh Kumar, a spokesman for the Indian Ministry of External Affairs, said Saeed's release once again confirms Pakistan's "lack of seriousness" in bringing perpetrators of terror to justice.
"It also appears to be an attempt by the Pakistani system to mainstream proscribed terrorists. Pakistan has not changed its policy of shielding and supporting nonstate actors, and its true face is visible for all to see," Kumar said.
He called Saeed the "prime organizer" of the Mumbai attacks and said he is "also responsible for unleashing numerous other terror attacks against Pakistan's neighbors."
"It is the responsibility of Pakistani government to fulfill its international obligations and take credible and effective action against terrorists like Hafiz Saeed. India, as indeed the entire international community, is outraged that a self-confessed and UN-proscribed terrorist is being allowed to walk free and continue his evil agenda."
Pakistan's Ministry of Foreign Affairs issued statement rejecting "India's self-serving insinuations" and said its "resolve, actions and successes" in fighting terrorism "is unmatched in the world."
"The courts in Pakistan, pursuant to their constitutional duty, are determined to uphold rule of law and due process for all citizens of Pakistan. Legal processes are anchored in rule of law, not dictates of politics and posturing," the statement said.
"Pakistan condemns and opposes all forms of terrorism by any individual or group. Pakistan also opposes and condemns acts of terrorism inside Pakistan and elsewhere by India, which claims to be a champion of democracy, and international law."
This story has been updated to reflect the full list of targets in the 2008 Mumbai attacks.