Fonseka was arrested two weeks after he lost presidential polls to Rajapakse in January 2010 and is currently serving a three-year sentence for alleging that the president's brother had ordered the execution of surrendering rebels.
President Rajapaksa got the approval of the cabinet to release Sarath Fonseka, Rajapakse’s spokesman Bandula Jayasekera said.
Fonseka is also serving a concurrent 30-month sentence handed down after a court martial found him guilty of irregularities when he was army chief.
He is currently being treated in hospital for respiratory problems following an assassination attempt by Tiger suicide bomber in 2006.
Sri Lanka on Saturday, marks the third anniversary since crushing the Tigers, with speculation rife that Fonseka would be pardoned wi