Reyat was found guilty of perjury in 2010 after he lied during the trial of two men accused in the Kanishka bombing that killed all 329 passengers on the plane, in Canada's worst terror attack.
Air India Flight 182 from Toronto to Delhi via London was destroyed by a bomb at an altitude of 31,000 feet. The Boeing 747 crashed into the Atlantic Ocean while in Irish airspace.
He previously served over 15 years in prison for making the bombs that were stuffed into two suitcases and planted on planes leaving Vancouver.
The bombing of Air India 182 occurred at the same time as the Narita Airport bombing in Japan. Investigators believe that the two plots were linked.
Under Canadian law, offenders must be granted statutory release after they have served two-thirds of their sentence.
However, Parole Board of Canada spokesman Patrick Storey said Reyat must abide by several conditions as part of his release, including not possessing any extremist propaganda or possessing any components used to build an explosive device.
Reyat is set to serve the rest of his sentence, which ends in August 2018, at a halfway house.
Halfway houses are meant for reintegration of persons who have been recently released from jail.
Storey said he could not disclose the location of the residence due to privacy legislation.
The parole board ruling for Reyat's release said a psychologist's assessment in 2013 found the man's risk was "relatively high" for future group-based violence and that he lacked remorse for the victims of the bombings.
"Until recently, you took limited responsibility for your role in this catastrophic disaster, you lied in court and protected others involved."
If Reyat breaches any of the conditions, he can be sent back to prison, Storey said.
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