Frontier Crimes Regulation Commissioner Sahibzada Mohammad Anees ruled that a judge in the tribal belt had exceeded his authority when he handed down the sentence last year and ordered a new trial.
Anees handed over Afridi's case to the political agent of the semi-autonomous Khyber Agency. He said Afridi could be released only on the orders of the political agent.
"The assistant political agent...Did not have the authority to award 33 years' imprisonment to Dr Shakeel Afridi," Anees said in his order.
Afridi, in his forties, was sentenced to 33 years in jail on May 24, 2012 after being convicted of treason over alleged ties to the banned Lashkar-e-Islam and not for working for the CIA. He was also fined Rs 320,000 (USD 3,500).
The verdict was issued by the assistant political agent, who has judicial powers.
Afridi was accused of conducting a fake vaccination campaign on behalf of the CIA in Abbottabad as part of efforts to trace bin Laden.
The Al Qaeda chief was killed in a unilateral US military raid in the garrison town in May 2011, sending bilateral relations into a tailspin and embarrassing Pakistan's powerful military.
Welcoming today's order, Afridi's cousin Qamar Nadeem Afridi told BBC it was a "great development". He said the "true facts" would come out now.
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