Abdi Mohamed Omar, commonly known as Abdi Iley, was arrested in August 2018 and charged with inciting violence in his volatile region.
The charges followed fighting in the regional capital Jijiga and nearby towns that left dozens dead.
On Thursday, the justice ministry announced that Abdi's charges have been terminated "for the sake of people's interest," Ethiopia's official press agency ENA said.
The restive Somali region is Ethiopia's second-largest but also one of its most unstable.
Clashes in 2018 began in early August when the Ethiopian military moved into Jijiga, sparking looting and mob attacks on non-Somali residents.
The violence was the most serious in Somali region since 2017, when clashes between Somalis and the neighbouring Oromo people along the borders of their ethnically demarcated states forced 1.1 million people from their homes and left hundreds dead.
It was unclear what sparked the military's intervention.
Abdi—who was accused by rights groups of sanctioning abuses — was arrested later that month after stepping down as the region's president.
Thursday's pardon also saw Kinfe Dagnew, a former head of the military-run Metals and Engineering Corporation (METEC), released, ENA said.
Kinfe was also arrested in 2018 on accusations of corruption and human rights abuses.
Ethiopia Releases Former Head of Somali Region
ADDIS ABABA—The former president of Ethiopia's southeastern Somali region was released from prison after five years, state media reported on Thursday.
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