Mr Hedges’ whereabouts is not yet known but a UAE official confirmed his release following a news conference announcing that he had been pardoned earlier on Monday.
At the news conference, an official showed a video – seen by Sky News – purporting to show Mr Hedges confessing to the charges against him, in which he said he was a member of MI6.
The UAE claimed it had evidence he was collecting sensitive economic data and information on its military.
The official said the Durham University researcher was approaching sources as a PhD student to gain access to information but maintained that he was “100% a full-time secret service operative”.
He said the data Mr Hedges collected went “far beyond” academic research.
Despite the claims, Mr Hedges, who was arrested at Dubai Airport as he tried to leave the country on 5 May, was issued a “presidential pardon” with immediate effect.
He is to be released alongside 784 other prisoners as part of the UAE’s 47th National Day. Officials said he would leave the country after relevant procedures had been completed.
Foreign Secretary Jeremy Hunt said the pardon was “fantastic news” but said the UK did not agree with the charges lodged against the 31-year-old, who is from Exeter.
He wrote: “Fantastic news about Matthew Hedges. Although we didn’t agree with charges we are grateful to UAE govt for resolving issue speedily.
“But also a bittersweet moment as we remember Nazanin & other innocent ppl detained in Iran. Justice won’t be truly done until they too are safely home.”
Mr Hedges’ wife Daniela Tejada welcomed the news and said she “cannot wait to have Matt back home”.
In a statement, she said: “The presidential pardon for Matt is the best news we could have received. Our six plus months of nightmare are finally over and to say we are elated is an understatement.
“That he is returning home to me and the rest of his family is much more than I was ever expecting to happen this week.
“I thank you all for your support. Without the involvement of the media, the overwhelming support of academics, the public worldwide, the work of the British diplomatic body in the UAE and Secretary Hunt’s intervention, this would have never happened.”
The release comes after Ms Tejada told Sky News she was “hopeful” a plea for clemency to the United Arab Emirates would secure his release, even though he had been handed a life sentence.
She previously spoke after the UAE’s ambassador to the UK, Sulaiman Almazroui, revealed it was considering an appeal from Mr Hedges’ family as he expressed the hope that an “amicable solution” could be reached.
He insisted the conviction of Mr Hedges for spying in the UAE was not the result of a show trial and argued the evidence in the case had been “compelling”.
Following the pardon, the country’s foreign minister, Dr Anwar Gargash, said the move would allow the UK and UAE to “return our focus to the underlying fundamental strength of the UAE-UK bilateral relationship”.
According to the WAM Emirates news agency, he added: “It was always a UAE hope that this matter would be resolved through the common channels of our long-standing partnership. This was a straightforward matter that became unnecessarily complex despite the UAE’s best efforts.”
Professor Stuart Corbridge, vice chancellor of Durham University, said he was “absolutely delighted” at the development.
“We will continue to offer Matt’s family our full support in the aftermath of this traumatic ordeal and we will be thrilled to welcome him back to the Durham University community,” he added.
University of Durham’s Professor John Williams told Sky News of his “great relief” and “delight” at the release of Mr Hedges.
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Responding to claims of a confession, he said: “Without the context of the full video it’s very hard to reach much of a judgement… other people have pointed to what they think of are pretty significant inconsistencies in what Matthew’s said in relation to how that might have stacked up against say rank structures within MI6 for example.”
Amnesty International also welcomed Mr Hedges’ release, saying it was “a huge relief and goes some way to righting a wrong after Matthew’s grossly unfair trial”.