His release comes just days after a landmark ruling by Australia's High Court that outlawed indefinite immigration detention, leading to the release of dozens of asylum seekers.
Sirul Azhar Umar and another police officer, Azilah Hadri, were sentenced to death after being found guilty in Malaysia of the murder of 28-year-old Altantuya Shaariibuu, an interpreter to a former associate of ex-prime minister Najib Razak.
Sirul was arrested on an Interpol notice and has been held in an Australian immigration detention centre since January 2015 after fleeing Malaysia shortly before the verdict was handed down.
Sirul, who could not immediately be reached for comment, is now living with his son in Canberra, Australian media reported on Sunday.
Australia's immigration authorities declined to comment on the matter.
Malaysia's top police official Razarudin Husain confirmed news of Sirul's release from Australian detention and said police would discuss with the Attorney-General and the courts the possibility of seeking extradition.
Sirul Azhar Umar was a security officer for former Malaysian prime minister Najib Razak (pictured).
Malaysia in April passed legal reforms to abolish the mandatory death penalty, allowing people facing the punishment to seek a sentencing review.
Under Australian law, a person cannot be deported if they face the death penalty.
Azilah, Sirul's co-accused, remains on death row in Malaysia.
Shaariibuu's murder has been at the centre of a political scandal for years.
She was killed in a forest on the outskirts of Malaysia's capital in 2006, according to court records, but the question of who ordered the killing has never been answered.
Sirul was serving as a member of Najib's personal security detail at the time of the murder.
Civil society groups have alleged her murder was linked to her role as an interpreter in Malaysia's purchase of two French submarines in 2002.
Najib, who was then defence minister and later became prime minister, has repeatedly denied allegations of links to Shaariibuu or corruption in the submarine purchases.
