His release came hours after he told Reuters in an interview at Riyadh's opulent Ritz-Carlton hotel that he expected to be cleared of any wrongdoing and be freed within days.
The terms of his release were not immediately clear, and Saudi officials could not immediately be reached for comment.
But the decision to free him, and the release of several other well-known tycoons on Friday, suggested the main part of the corruption probe was winding down after it sent shockwaves through Saudi Arabia's business and political establishment.
Prince Alwaleed had been confined at the Ritz-Carlton since early November, along with dozens of other senior officials and businessmen, part of Crown Prince Mohammed bin Salman's plan to reform oil superpower Saudi Arabia and consolidate his power.
Earlier this week the attorney general said 90 detainees had been released after having their charges dropped, while others had traded cash, real estate and other assets for their freedom. Authorities were still holding 95 people, he said. Some are expected to be put on trial.
On Friday, an official Saudi source said several prominent businessmen have reached financial settlements with authorities, including Waleed al-Ibrahim, owner of regional television network MBC, who was released. Terms of his settlement were not revealed.
Saudi authorities have said they expect to raise some $100 billion for the government through such settlements - a huge windfall for the state, which has seen its finances squeezed by low oil prices.
Allegations against Prince Alwaleed, who is in his early 60s, included money laundering, bribery and extorting officials, a Saudi official told Reuters in early November.
He said he expected to keep full control of his global investment firm Kingdom Holding Co without being required to give up assets to the government.
The release of Prince Alwaleed, whose net worth has been estimated by Forbes magazine at $17 billion, is likely to reassure investors in his global business empire as well as in the Saudi economy broadly.
Directly or indirectly through Kingdom Holding, he holds stakes in firms such as Twitter Inc and Citigroup Inc, and has invested in top hotels including the George V in Paris and the Plaza in New York.
"There are no charges. There are just some discussions between me and the government," he said in the interview. "I believe we are on the verge of finishing everything within days."
Prince Alwaleed appeared greyer and thinner than in his last public appearance, a television interview in October, and had grown a beard while in detention.
"I have nothing to hide at all. I'm so comfortable, I'm so relaxed. I shave here, like at home. My barber comes here. I'm like at home, frankly speaking," he said.
"I told the government I'd stay as much as they want, because I want the truth to come out on all my dealings and on all things that are around me."
He granted the 30-minute interview, including a tour of his suite, partly to disprove rumours of mistreatment and of being moved from the hotel to a prison.
The prince said he was able to communicate with family members and executives at his business during his time in detention.
Prince Alwaleed showed off the comforts of his gold-accented private office, dining room and kitchen, which was fully stocked with his preferred vegetarian meals.
In the corner of his office sat tennis shoes, which he said he used regularly for exercise. A television played business news programmes, and a mug with an image of his own face on it was perched on the desk.
After being released, Prince Alwaleed said, he plans to continue living in Saudi Arabia and to return to the challenge of juggling his global business interests.
"I will not leave Saudi Arabia, for sure. This is my country. I have my family, my children, my grandchildren here. I have my assets here. My allegiance is not on the table."
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