Belgrade on Thursday released a Kosovo Albanian whose arrest last week raised tensions between the former foes, prompting Pristina to advise its citizens not to travel through the neighbouring Serbian territory.
Hilmi Kelmendi's detention was "called off," his lawyer Sead Spahovic said.
"The prosecutor gave up the prosecution, so I expect (Kelmendi) to leave the detention facility in the coming hours," he told AFP.
"The case is dismissed."
Kelmendi, 36, was arrested while travelling from Kosovo to Germany on suspicion of committing war crimes during the 1998-1999 conflict.
Kosovo's foreign ministry had described Kelmendi's arrest as "unacceptable" saying it threatened the "many processes achieved during the dialogue for the normalisation of relations" between the two.
The arrest was the second within a month, following that of senior Kosovo police chief Nehat Thaqi at the end of September.
He was released on Monday after the prosecutor in Belgrade dropped the "terrorism" charges against him.
The arrests had increased tensions between Pristina and Belgrade, which have been strained since Kosovo unilaterally declared independence in 2008.
Serbia has refused to recognise the move and still considers the breakaway territory its southern province.
