The pope visited Paolo Gabriele in prison recently and issued a papal pardon after deciding Gabriele was sincerely repentant and would not cause any further trouble for the church, the Vatican said in a written statement.
"Since he cannot resume his previous occupation or continue to live in Vatican City, the Holy See, trusting in his sincere repentance, wishes to offer him the possibility of returning to a serene family life," the statement said.
The New York Times said the Vatican pledged it would help Gabriele find a job and a place to live.
Gabriele was arrested in May after an investigation into confidential information that appeared in a book about the pope. CNN said Gabriele professed his innocence during his trial but claimed he had violated the pope's trust and asked for forgiveness.