Liu, who had about three years of his 11-year sentence to serve, was diagnosed on May 23 and was released days later, said lawyer Mo Shaoping.
The 61-year-old democracy campaigner was being treated at a hospital in the northeastern city of Shenyang.
"He has no special plans. He is just receiving medical treatment for his illness," Mo said.
The writer was jailed in 2009 for "subversion" after spearheading a bold petition for democratic reforms.
He was awarded the Nobel peace prize a year later. He is one of only three people to have won the award while jailed by their own government.
China strongly condemned his Nobel prize as unwanted foreign interference in its internal affairs, and refused to allow him to attend the ceremony in Oslo -- where he was represented instead by an empty chair.
Asked about Liu's release, foreign ministry spokesman Geng Shuang told a regular news briefing: "I am not aware of the situation you're talking about."
The international community has been calling for his release for years.
Liu was arrested in 2008 after co-writing Charter 08, a bold petition that called for the protection of basic human rights and the reform of China's one-party Communist system.
Charter 08, which was posted online, specifically demands the abolition of subversion as an offence in China's criminal code -- the very crime for which Liu has been jailed.
His wife, Liu Xia, has been under house arrest since 2010. She suffered a heart attack in 2014, when she was diagnosed with depression after years of detention, a rights group said at the time.
Liu is also known for his efforts to help negotiate the safe exit from Tiananmen Square of thousands of student demonstrators on the night of June 3, 1989 when the military quelled six weeks of protests in the heart of Beijing.
He was arrested immediately after the crackdown and released without charge in early 1991.
Liu was rearrested and served three years in a labour camp from 1996-1999 for seeking the release of those jailed in the Tiananmen protests and for opposing the government's verdict that they amounted to a counter-revolutionary rebellion.
The holder of a doctorate in Chinese literature, Liu was once a professor at Beijing Normal University, but was banned from teaching at state institutions over his involvement in the 1989 demonstrations.
As a leading member of the Independent China Pen Centre, a grouping of Chinese writers, Liu had remained in close contact with key intellectuals and had been largely free to attend meetings and writer group activities despite constant police surveillance.
Although Liu was banned from publishing in China, many of his writings advocating greater democracy and respect for human rights appeared in Hong Kong and overseas Chinese publications.
Some of these writings served as evidence in his most recent trial, according to rights groups.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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