Warren Richard Rodwell, 54, was described as emaciated after his release about 1:30 a.m. in the coastal town of Pagadian on the southern island of Mindanao, The New York Times reported.
Col. Rodrigo Gregorio, a military spokesman, said Rodwell was "fine, but he looked very thin."
Rodwell moved to the Philippines in 2011 to join his Filipino wife Miraflor in her hometown of Ipil. He was kidnapped in December of that year by members of Abu Sayyaf, who demanded $2 million in ransom.
Abu Sayyaf is a loosely knit group of Islamic extremists linked to a series of abductions, beheadings and bombing in the last decade.
Gregorio said he did not know if any ransom was paid.
Australian Foreign Minister Bob Carr said his government had not paid any ransom, but declined to comment if Rodwell's family or others had.
Basilan Vice Gov. Al Rasheed Sakalahul said Rodwell was released after Abu Sayyaf was paid about $97,800, the Inquirer Mindanao reported.
Sakalahul said he knew the amount because Abu Sayyaf leader Pujuri Indama counted the money on his desk after Miraflor Rodwell's brother, Roger Gutang, delivered the ransom.
After he was freed, Rodwell was taken by U.S. military helicopter to Zamboanga City and whisked away by U.S. soldiers to a Philippine military hospital.