The Moscow City Court overturned a district court's decision to extend the house arrest for Kirill Serebrennikov, and ordered him freed on his own recognizance and requested that he not leave the Russian capital pending completion of his trial. Two of his associates were also freed from house arrest.
Serebrennikov has been under house arrest for nearly 20 months on charges of embezzling 133 million rubles (about $2 million) of state funding for a theater project. He has rejected the accusations as absurd, and many in Russia saw the charges as punishment for his anti-establishment views.
Speaking to reporters after the court's verdict, Serebrennikov said he would push for his acquittal.
"I would only be happy when this nightmare ends completely and we prove our innocence," he said.
Serebrennikov added that he would quickly return to work at his Gogol Center theater.
"It's going to be difficult psychologically, but we have so much work to do," he said.
Serebrennikov's ballet about dancer Rudolf Nureyev premiered in Moscow's Bolshoi Theater when he was already under house arrest, and his film "Leto" (Summer) about the country's Soviet-era rock scene was shown at the Cannes Film Festival last year despite his absence.
Top members of the Russian artistic community have continuously appealed to President Vladimir Putin to set Serebrennikov free, and many prominent international artistic figures have joined the call.
Putin's spokesman, Dmitry Peskov, refrained from comment on the court's decision to free Serebrennikov.
Serebrennikov's productions, ranging from drama to opera and movies, have mocked official lies, corruption and growing social conservatism.
They have been criticized by hard-line politicians and conservative activists, and his arrest in August 2017 has raised fears of a return to Soviet-style censorship.
Serebrennikov's backers have argued that Serebrennikov fell victim to arcane bureaucratic rules that make it very difficult for any director to make theater productions without breaching some of the convoluted official norms.
Mikhail Fedotov, head of the presidential human rights council, hailed the court's ruling as "long overdue" in remarks carried by the Interfax news agency, adding that Serebrennikov shouldn't have been under house arrest in the first place.