Federal Judge Mariana Arjol said an appeals court in Misiones province ordered the conditional release of Quattrocchi after he was detained by Argentine authorities on Feb. 6 at an airport in the northern city of Puerto Iguazu.
It was not immediately clear when he was freed but Arjol said her court had rejected the request for release.
"They appealed and the (appeals) court granted it," she said.
Indian authorities accuse Quattrocchi of taking $7 million in bribes as a middleman in the $1.2 billion purchase of artillery from Swedish arms maker Bofors AB in 1986 for the Indian army.
Quattrocchi has denied any wrongdoing and left India in the early 1990s. He has since lived in Malaysia and Europe.
Argentine authorities say Quattrocchi appeared to be traveling en route to the Argentine capital, Buenos Aires.
He is believed to have been a friend of Sonia Gandhi, the powerful, Italian-born chief of the ruling Congress Party.
The arms scandal seriously dented the reputation of her late husband, then-Prime Minister Rajiv Gandhi, and contributed to the fall of his government in elections in 1989.
A Delhi court exonerated Gandhi of wrongdoing in 2004, 13 years after he was assassinated by a suspected Sri Lankan Tamil Tiger suicide bomber.
Other key figures in the Bofors case also have died and the company has since changed its name.
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