The Christmas Eve pardon was met with street protests and condemnation from some lawmakers, who questioned whether there was a political deal behind what current President Pedro Pablo Kuczynski's office described as a humanitarian gesture.
Kuczynski's pardon of Fujimori comes less than a week after the current president survived an impeachment hearing stemming from a corruption scandal that has swept Latin America.
Fujimori "suffers from a progressive, degenerative and incurable disease," according to a statement from Kuczynski's office. "Prison conditions mean a serious risk to his life, health and integrity."
On Saturday, Fujimori, 79, was transferred to a Lima hospital after experiencing a drop in blood pressure and a heart arrhythmia, his doctor told reporters.
Kuczynski pardoned Fujimori and seven other persons "in similar condition" on Sunday evening.
Critics of Kuczynski's decision to pardon Fujimori protested at Plaza San Martin, just a few blocks away from the presidential palace. The protesters clashed with police officers, who fired tear gas to disperse the crowd, the state-run Andina news agency reported.
Meanwhile, supporters of the pardoned ex-president gathered outside the hospital where Fujimori is currently being treated. They sang, danced and celebrated outside the hospital.
Questions of political motives
Fujimori's son, Kenji Fujimori, was among several lawmakers who abstained from last week's vote to remove Kuczynski from office. Kuczynski survived
, in part, because a total of 10 lawmakers from Kenji Fujimori's party abstained, breaking ranks with their own leadership. Members of the party, Popular Force, are known as "Fujimoristas" because of their support of the former president.
Local media reports chronicled how the split vote caused friction within the group, including one party spokesman who alleged that those who abstained did so as part as a pact with Kuczynski to pardon Alberto Fujimori.
The current president has not publicly commented on the pardon beyond the statement released by his office.
Kenji Fujimori thanked Kuczynski on Twitter for his "noble and magnanimous gesture" of approving his father's pardon.
He later tweeted a video of himself and his father from inside the hospital, reading the presidential pardon together on a mobile phone.
Keiko Fujimori, the daughter of Alberto Fujimori who ran unsuccessfully against Kuczynski last year, also tweeted
"Today is a great day for my family and for Fujimorism. My father is finally free. This Christmas will be full of hope and joy!!"
Keiko Fujimori, the leader of Popular Force, had voted to impeach Kuczynski.
An authoritarian figure
Fujimori is a polarizing figure in Peru, the country he led from 1990 to 2000. His strong hand is credited with defeating the Shining Path terrorists who destabilized the country, and his austere economic policies reined in hyperinflation.
But the former president had an authoritarian streak and used security forces to repress opponents. In 2009, a special supreme court tribunal sentenced the former president to 25 years in prison for authorizing the operation of a death squad responsible for killing civilians.
Jose Miguel Vivanco, executive director for the Americas Division of Human Rights Watch, denounced the pardon and also alluded to allegation of a pact.
"Instead of reaffirming that in a state with rule of law there is no room for special treatment for anyone, the thought that will persist forever is that his freedom was a crude political negotiation in exchange for (Kuczynski) to remain in power," Vivanco tweeted.
One lawmaker from Kuczynski's own party announced on Sunday that he will resign from the party because of the pardon.
In all, Alberto Fujimori was convicted in four different criminal trials.
In addition to the human rights conviction that saw him sentenced to 25 years, in separate trials Fujimori was found guilty of breaking into the home of a former spy chief to steal incriminating videos, taking money from the government treasury to pay the spy chief and authorizing illegal wiretaps and bribing congressmen and journalists.