The ex-BBC correspondent was arrested in December 2013 for allegedly spreading false news that was perceived to be aiding the Muslim Brotherhood.
It is believed that he has been deported to nearby mediterranean island nation of Cyprus, the release was said to be co-ordinated with the Australian embassy in Cairo.
Greste was detained in Egypt along with two other al-Jazeera journalists, Mohamed Fahmy and Baher Mohamed, who remain in detention there.
Reports have surfaced that Fahmy will also be freed and deported to Canada, as he holds both Egyptian and Canadian citizenship, but there are still concerns for the welfare of Mohamed, who has no dual nationality.
Fahmy may have his Egyptian nationality revoked when he is freed and deported, Egyptian presidential sources have said.
The three men denied all charged against them calling out from the holding cells during their conviction that the whole trial was a sham.
They were accused of assisting the Muslim Brotherhood after the overthrow of then President Mohammed Morsi by military force in 2013.
The men had said at the time of their trail that they were simply reporting the news.
Their plight reverberated with journalists and the media industry internationally who campaigned through social media for the release of the three men using the hashtag: #journalismisnotacrime.
After much international outcry and campaigning, especially by Greste’s parents in Australia, Egypt’s highest court ordered a retrial of all three men.
This followed current Egyptian President Abdul Fattah al-Sisi remarks only a few months before where he hinted that he was considering the possibility of granting pardons to the two foreign al-Jazeera journalists.
Abdul Fattah al-Sisi had earlier signed a decree on repatriating foreign prisoners.
Al-Jazeera has welcomed the news of Peter Greste’s release on social media while still demanding that Mr Fahmy and Mr Mohamed also be freed.
“We’re pleased for Peter and his family that they are to be reunited. It has been an incredible and unjustifiable ordeal for them, and they have coped with incredible dignity,” said Mostefa Souag, acting director-general of al-Jazeera media network.
“We will not rest until Baher and Mohamed also regain their freedom.”
“The Egyptian authorities have it in their power to finish this properly today, and that is exactly what they must do.”
Mr Greste’s brother Andrew said in a statement released by the family:
“We’re ecstatic that Peter has been released and we now ask if the world could respect his privacy, to give him time to appreciate his freedom before he faces the media.”
Grete’s brother Mike confirmed that Peter landed at Larnaca airport at 4pm local time on Sunday and that he is expected to travel to Australia to be reunited with his parents Lois and Juris.