An American CIA agent detained on suspicion of murder has been released after families of the two Pakistanis he killed pardoned him in exchange for 'blood money'.
Raymond Allen Davis has been in jail since Jan. 27, seriously straining ties between Pakistan and the United States.
Punjab Law Minister Rana Sanaullah says Davis was charged with murder on Wednesday but was then pardoned by the families of the victims in exchange for compensation payment.
Chaudhry Mushtaq, superintendent at Kot Lakhpat jail, says Davis had left the jail in the company of U.S. consulate officials.
U.S. officials were not available for comment.
Pakistani law allows murder suspects to be set free if they compensate the heirs of their victims.
Washington insisted Davis was acting in self-defense against robbers after he shot two men while he was driving through the eastern city of Lahore.
A third Pakistani was killed when struck by a U.S. car rushing to aid the American.
The United States had protested the detention of Davis, saying he has protected status from prosecution.
U.S. officials initially described Davis as a consulate or embassy employee, but have since said on condition of anonymity that he was doing security work in Pakistan as a contractor for the CIA. They have said this does not make any difference to his right to diplomatic immunity.
Last month, President Barack Obama referred to him as 'our diplomat' and demanded he be free.
The Davis case became a flashpoint for Pakistani nationalism and anti-American suspicion, making it harder for Pakistani authorities to back down despite intense U.S. pressure.
Thousands rallied to demand that Davis be hanged with the Taliban threatening attacks against Pakistani officials involved in freeing the Virginia native.
Shumaila Faheem, the widow of one of the dead men, committed suicide by taking poison, saying she feared her husband Faheem's death would go unpunished.
In addition to igniting a diplomatic standoff, Davis' case has strained relations between the CIA and Pakistan's spy agency, the Inter-Services Intelligence (ISI), which did not know of Davis' presence in the country.
CIA-ISI ties are essential to battling Al Qaeda and Taliban militants in Pakistan and neighbouring Afghanistan, where U.S. and other foreign forces are fighting an almost-decade-old war which has become increasingly bloodier over the past few months.
Relations between the spy agencies took a blow in December, when the CIA station chief in Islamabad was forced to leave the country after his name was published in a court filing over drone attacks. Davis' case made matter worse.
'Post incident conduct of CIA has virtually put the partnership into question... it is hard to predict if the relationship will ever reach the level at which it was prior to the Davis episode,' the ISI said in a letter to the Wall Street Journal.