Detained on a Serbian arrest warrant as he flew into France in January, he was released on condition that he did not leave the country.
A court in Colmar in eastern France ruled on Thursday that he was now free to leave France.
The decision prompted delight among the former prime minister's supporters outside the court as well as in Kosovo's capital, Pristina.
Kosovo Foreign Minister Enver Hoxhaj said he was grateful to France for handling the case but criticised what he called Serbia's "ill-intended allegations".
Serbia called an immediate cabinet meeting to discuss the court's decision, which cannot be appealed.
The case has heightened tensions between Serbia and Kosovo, which declared independence in 2008.
Ramush Haradinaj, now an opposition leader in Kosovo, was arrested by police at Basel Mulhouse Freiburg airport, close to the Swiss and German borders on 4 January.
Serbia has accused the former Kosovo Liberation Army commander of overseeing a campaign of torture and murder against ethnic Serbs during the 1998-99 conflict.
He has been tried and acquitted twice at the UN tribunal at The Hague, although Serbia said it had further evidence involving civilian murders which it was asked to hand to the French court.
Mr Haradinaj has consistently denied the allegations, and stepped down as prime minister after just 100 days to face the charges.
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