A CIA agent detained on suspicion of murder has been released after families of the two Pakistanis he killed pardoned him in exchange for 'blood money'.
Raymond Allen Davis has been in jail since January 27, seriously straining ties between Pakistan and the United States.
Punjab Law Minister Rana Sanaullah says Davis was charged with murder on Wednesday but was then pardoned by the families of the victims in exchange for compensation payment.
Chaudhry Mushtaq, superintendent at Kot Lakhpat jail, says Davis had left the jail in the company of U.S. consulate officials.
Pakistani law allows murder suspects to be set free if they compensate the heirs of their victims.
The move comes after brothers of the two dead men said last month they would not accept 'blood money' for the deaths.
'We only want justice. We want blood for blood and nothing else,' Mr Wasim, brother to victim Mohammed Faheem said.
Similarly, Mr Faheem's widow Shumaila committed suicide by taking poison, saying she feared her husband's death would go unpunished.
Washington insisted Davis was acting in self-defence against robbers after he shot two men while he was driving through the eastern city of Lahore on January 27.
Some reports quoted Pakistan intelligence officers as saying the men Davis killed - 21-year-old Faizan Haider and 19-year-old Mr Faheem - were ISI agents ordered to shadow him.
They had been told to do so because he had crossed a 'red line', the rumours claimed.
A third Pakistani was killed when struck by a U.S. car rushing to aid the American.
Bystander Ibadur Rehman, died when he was struck by the car with U.S. 'consulate personnel' inside.
The U.S. has said very little about that death, and it's highly unlikely any Americans in the car remain in Pakistan.
The United States protested the detention of Davis from the start, saying he has protected status from prosecution.
And last month, President Barack Obama referred to him as 'our diplomat' and demanded he be free.
U.S. officials also initially described Davis as a consulate or embassy employee, but later said on condition of anonymity that he was doing security work in Pakistan as a contractor for the CIA.
They maintained this did not make any difference to his right to diplomatic immunity.
The Davis case became a flashpoint for Pakistani nationalism and anti-American suspicion, making it harder for Pakistani authorities to back down despite intense U.S. pressure.
The revelations gave new life to conspiracy theories in Pakistan about armed American mercenaries roaming the country's streets at will.
Thousands rallied to demand that Davis be hanged with the Taliban threatening attacks against Pakistani officials involved in freeing the Virginia native.
The disagreement risked sparking a major international incident after rampant anti-American sentiment in Pakistan grew in the wake of the killings.
U.S. authorities threatened to withhold billions of dollars in aid to the country if Davis was not released.
In addition to igniting a diplomatic standoff, Davis' case has strained relations between the CIA and Pakistan's spy agency, the Inter-Services Intelligence (ISI), which did not know of Davis' presence in the country.
CIA-ISI ties are essential to battling Al Qaeda and Taliban militants in Pakistan and neighbouring Afghanistan, where U.S. and other foreign forces are fighting an almost-decade-old war which has become increasingly bloodier over the past few months.
Relations between the spy agencies took a blow in December, when the CIA station chief in Islamabad was forced to leave the country after his name was published in a court filing over drone attacks. Davis' case made matter worse.
'Post incident conduct of CIA has virtually put the partnership into question... it is hard to predict if the relationship will ever reach the level at which it was prior to the Davis episode,' the ISI said in a letter to the Wall Street Journal
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