The other three including the captain and two officers of the seized 508-foot, 14,000-ton vessel "Chong Chon Gang" will remain under detention to face arms smuggling charges, CNN reported, quoting Panama's head prosecutor Nathaniel Murgas.
The seized vessel would be released after North Korea pays a fine of about $660,000, the Panamanian Foreign Ministry had said earlier.
The ship was seized on the Atlantic sides of the Panama Canal last July as it sailed from Cuba. The action came under the U.N. arms embargo and other sanctions against North Korea in response to its nuclear and missile tests.
The Panama Canal connects the Atlantic and Pacific Oceans.
The Chong Chon Gang, sailing from Cuba, was stopped on suspicion that it was carrying drugs, the BBC said.
However, upon inspection by Panamanian authorities, it was reportedly found to be transporting various items including MiG fighter jets, anti-aircraft systems and explosives concealed under a huge consignment of sugar.
At the time, North Korea had said the "aging" weapons were to be returned to Cuba after repairs.
But Panamanian officials in October said two of the planes and 15 of the jet engines were found to be in excellent condition.
The detained crew members were being housed in comfortable, air-conditioned quarters and were being given access to the North Korean diplomatic personnel in Cuba, officials said.
On Thursday, Panamanian Attorney General Ana Belfon said the 32 released crew members would be deported Cuba or to other countries, CNN said.
The captain and the other two officers could face sentences of up 12 years if convicted of their charges.
The BBC said the Chong Chon Gang, prior to its seizure, had traveled from Russia's Far East in April across the Pacific Ocean before entering the Panama Canal in June on its way to Cuba. The report said the ship, however, had crossed the Pacific without turning on its automatic tracking system.