Putin signed a pardon for the former oil tycoon, once Russia’s richest man, on Friday afternoon.
The move effectively puts Khodorkovsky in exile, nearly a decade after his imprisonment.
Khodorkovsky was sentenced to nine years' imprisonment for fraud in 2005, and his company, Yukos, was broken apart by the Russian government. His prosecution was widely condemned as an abuse of the legal system by Putin to eliminate a rival. The U.S. State Department at the time accused Russia of engaging in “selective” prosecutions.
The pardon is accompanied by a major amnesty passed by the Russian parliament on Thursday, celebrating the 20th anniversary of Russia's post-Communist constitution.
According to Russian lawyers, the amnesty will lead to the early release of the punk band Pussy Riot, whose members were imprisoned for hooliganism after a protest in a Russian Orthodox Church. Greenpeace Russia announced on Twitter that the bill should also lead to the release of 30 people who were arrested in September for protesting at a Russian oil platform in the Arctic.
Russia's various clemency measures come just a few months before the 2014 Winter Olympics in Sochi. The run-up to the Olympics had drawn the spotlight to Russia's controversial human rights record. Putin said last month when the amnesty bill was first proposed that it would “underscore the humanism of our state.”