Lashkar-e-Jhangvi (LeJ) leader Malik Ishaq, who was named a "Specially Designated Global Terrorist" by US earlier this year, was acquitted by the court in Rawalpindi.
The leader of LeJ, which has carried out a number of attacks inside Pakistan killing mostly Shiites, was arrested last year for inciting violence through his hate speeches in Attock, Chakwal and Jehlum districts of Punjab province.
Ishaq was freed for want of evidence against him in the three cases filed by the government of Punjab, his lawyer said.
Lashkar-e-Jhangvi, set up in 1995, was officially banned in 2011 but it operates rather openly in Pakistan and targets Shias.
It emerged as a spin-off from the Sipah-e-Sahaba, a fellow anti-Shiite group in the late 1990s and is believed to have close ties to the Pakistani Taliban as well as Al-Qaeda.
Ishaq's release may spark a new wave of militancy against the Shiite Muslims who constitute about 20 per cent of the 180 million population of Pakistan.
He has intermittently been freed to act as a mediator between the government and Punjab-based militants.
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