Ramin Nematizadeh walked out of the prison in Shiraz, the capital of the southern Fars province, where him and nine other Jews were convicted in July of spying, IRNA reported. Although his term officially ends on March 17, Nematizadeh was released earlier on the occasion of Eid al-Adha, or the Muslim feast of sacrifice, IRNA said.
Judicial officials have said earlier they would take into account the time Nematizadeh had spent in detention awaiting trial.
Nematizadeh, a shop clerk in his late 20s whose four-year sentence was reduced in September to two years, had confessed in court to gathering military information for Israel during his mandatory army service and sending it to Israel. He had received the shortest sentence of the 10 Jews convicted.
Arrests of the 10 suspects, and three others acquitted, began in March 1999.
In September, the appeals court revised the convictions to cooperation with Israel and reduced the original prison sentences, which had ranged from four to 13 years, so that the minimum term was two years and the maximum was nine.
Human rights groups have questioned the fairness of the initial trial, which was held behind closed doors, without a jury and with the judge also acting as prosecutor. The United States and Israel, which denies the convicted men were its agents, have called for overturning the convictions.
Iranian Jews are allowed to practice some aspects of their religion freely, but like all Iranians are forbidden any contact with Israel. Teaching of Hebrew, the liturgical language, also is not permitted. About 25,000 Jews live in Iran, making it the Middle Eastern nation with the largest Jewish community outside Israel.