The release of Chen, who was arrested Nov. 11, followed a four-hour hearing in Taipei District Court, The China Post reported.
The court ordered Chen to remain in Taiwan to face trial. No date was set for his trial. If convicted, Chen could be sent to prison for life.
Chen, 57, is the first ex-president in the island nation's history to be indicted. The charges stem from his handling of his discretionary "state affairs fund" while in office from 2000 until May 2008. He also allegedly transferred funds millions of dollars to foreign accounts held by his family.
Chen has denied the charges, claiming he is being targeted because of his stand against China.
While in office, Chen strongly advocated independence for Taiwan, which mainland China claims as its territory. President Ma Ying-jeou, who succeeded Chen, has sought to pursue a friendlier policy toward China.
Police: Sword-wielding man demanded free tacos
Wisconsin business offering 'therapeutic cuddling' forced to close