His release follows intense diplomacy by the United States, where Rusesabagina has permanent residency rights.
Washington designated him as "wrongly detained," partly because of what it called the lack of fair trial guarantees.
Historically close ties between the two countries have been strained over the case, and Rwanda's alleged meddling in Democratic Republic of Congo.
Rwanda said its decision to commute a 25-year prison sentence against Paul Rusesabagina, a fierce critic of President Paul Kagame, resulted from a wish to reset ties with the United States.
"This is the result of a shared desire to reset U.S.-Rwanda relationship," Kagame's press secretary Stephanie Nyombayire said on Twitter, adding that the close relationship between Rwanda and Qatar was a "key" factor.
Rusesabagina was sentenced in September 2021 over his ties to an organization opposed to Kagame's rule. He denied all the charges and refused to take part in the trial that he and his supporters called a political sham.
But Rusesabagina acknowledged having a leadership role in the opposition group, the Rwanda Movement for Democratic Change (MRCD), but denied responsibility for attacks carried out on Rwanda by its armed wing, the Forces for National Liberation (FLN).
The trial judges said the two wings of the group were indistinguishable.
"I regret not taking more care to ensure that members of the MRCD coalition fully adhered to the principles of non violence," Rusesabagina wrote in an October 14 letter to Kagame seeking clemency, which was seen by Reuters.
"If I am granted a pardon and released, I understand fully that I will spend the remainder of my days in the United States in quiet reflection," he wrote.
Rusesabagina will initially be flown to Doha, and then on to the United States, the source said.
His family said it was looking forward to reuniting with him.
"We are pleased to hear the news about Paul's release. The family is hopeful to reunite with him soon," the family said in a statement to AFP.
Callixte Nsabimana, known by his alias Sankara, an FLN spokesman who was convicted by a Rwandan court of terrorism, murder and hostage-taking in 2019, will be released alongside Rusesabagina and several others, the source said.
This report was sourced from Reuters and Agence France-Presse.