"Amjad Hafeez telephoned us from Iraq today and told us that he has been released unharmed," his uncle Abdul Razzaq told AFP.
Hafeez, 26, was captured by insurgents north of Baghdad and footage of him surrounded by masked gunmen was aired on Arabic television last Sunday.
His captors had threatened to behead him within 72 hours unless local prisoners were released.
Information Minister Sheikh Rashid said the government was made aware of Hafeez release through its mission in Baghdad.
"President Pervez Musharraf has taken a personal interest in the case and the government had been making hectic efforts through all available channels to secure the release of the national," Rashid told AFP.
The government had issued repeated appeals to the unknown abductors to free Hafeez in the name of "our noble religion Islam and humanity."
The head of Pakistan's interim mission in Baghdad, Iftikhar Anjum, had been in contact with religious and political leaders and tribal elders in Iraq to help secure Hafeez's release.
The government had also urged the captors to heed the pleas from Hafeez's relatives that he had "nothing to do with international politics."
Hafeez, the only breadwinner for his extended family in a remote village in Azad Kashmir, was working as a driver for a US company when he was captured in Balad.