Justice Myra Bielby ruled that Khadr -- who pleaded guilty to murder, attempted murder, providing material support for terrorism, spying and conspiracy
-- can be released because, she said, "there was no clear evidence there would be irreparable harm if he was released."
Under a plea deal with U.S. military prosecutors in October 2010, Khadr admitted to throwing a grenade during a 2002 firefight in Afghanistan that killed Sgt. 1st Class Christopher Speer, a member of a U.S. Army Special Forces unit.
Khadr agreed to the plea deal under the condition that he would serve most of the sentence in Canada, his attorneys said. As part of the deal, Khadr received an eight-year sentence with no credit for time served.
Parliament member Steven Blaney, who also is minister of public safety and emergency preparedness, criticized the judge's decision. Prime Minister Stephen Harper's government opposed Khadr's release, saying the convict remains a danger.
"We are disappointed with today's decision, and regret that a convicted terrorist has been allowed back into Canadian society without having served his full sentence," Blaney said in a statement.
"Omar Khadr pleaded guilty to heinous crimes, including the murder of American Army medic Sgt. Christopher Speer," Blaney said. "By his own admission, as reported in the media, his ideology has not changed."
Supporters of Khadr praised the ruling, calling it a victory for human rights, according to the website Free Omar Khadr Now.
The group said Khadr had written a letter to it, saying he will stay in Edmonton, Alberta.
"Since I've come to Edmonton I've been feeling more connected to this beautiful city and it's wonderful people. Everytime I see somebody new or somebody writes to me I feel that I belong to Edmonton and that makes my heart warm," Khadr's letter said, according to the group.
The group contended that Khadr pleaded guilty under torture at Guantanamo.
"Having been obtained by torture and other impermissible coercion, Mr. Khadr's acceptance of the plea bargain is not and cannot be considered an admission of guilt," the group said.
The group tweeted a photograph of Khadr's release Thursday.
Bail conditions require Khadr to live with his attorney under a curfew and with electronic monitoring, among other restrictions, his attorneys said.
In 2012, Khadr was transferred from Guantanamo naval base in Cuba to his homeland of Canada to serve the remainder of his sentence.
His case has sparked controversy among Canadians. Many say they think his sentence was too lenient. Others, noting his capture at age 15, say he should have been treated as a child soldier and point to alleged mistreatment while in custody.