President Alassane Ouattara had announced a deal to end the dispute Saturday evening following talks between Donwahi and the soldiers.
Mutinous soldiers released Ivory Coast's Defence Minister Alain Richard Donwahi late Saturday after detaining him for two hours in a tense standoff over pay.
Donwahi, who flew into the west African country's second city Bouake earlier Saturday in a bid to defuse an escalating crisis, was whisked out on a plane from the local airport shortly after his release, an AFP photographer said.
President Alassane Ouattara had announced a deal to end the dispute Saturday evening following talks between Donwahi and the soldiers, who took control of Bouake early Friday.
But angry troops rejected the terms of the agreement, firing Kalashnikov rifles and heavy weapons outside local government offices where they were meeting to block Donwahi and his team from leaving.
Ivory Coast, the world's top cocoa producer, has been rocked by two days of unrest after soldiers seized control of Bouake's streets early Friday, firing rocket-launchers and terrifying residents, in a mutiny that spread to other cities including the economic capital Abidjan.
The soldiers are seeking bonuses, pay rises, housing and faster promotion.
Bouake was the headquarters of an armed rebellion that broke out in 2002 and split Ivory Coast in two until 2011, sparking a decade of clashes and crises.
The current mutiny appears to have been spearheaded by former rebel fighters who have now been integrated into the army.
Shortly after Donwahi's release, troops lifted the barricades that had blocked entry to Bouake since Friday, and the automatic rifle fire that had rattled all through the previous night and into Saturday fell silent.
Neither Donwahi nor the mutineers made any comment as the minister was released. Donwahi and his aides headed straight to the airport and their plane took off immediately, an AFP photographer said.
Ouattara had given no details of the deal offered to the mutineers, saying in a brief televised announcement earlier that it took into account "the demands relating to bonuses and improving the living conditions of soldiers".
"Having given my agreement, I ask all soldiers to go back to their barracks to allow decisions to be carried out calmly," he added.
In Abidjan, national television reported earlier that shots had been fired at the northern Akouedo barracks, as soldiers put up barricades in the bustling commercial hub that is home to the presidency, government and parliament.
Troops closed off a major junction nearby, leaving the surrounding roads gridlocked, although images broadcast on national television late Saturday showed traffic returning to normal.
Schools and businesses remained shut Saturday in Bouake, where the unrest erupted early Friday when troops broke into a weapons depot, arming themselves with rocket-launchers and other weapons mounted on pickup trucks before attacking police posts, manning strategic junctions and putting up barricades.
Soldiers also took to the streets of Daloa and Daoukro in the country's centre as well as Korhogo and Odienne in the north on Friday. Though the protests there eased, the unrest had spread to Man in the west as well as Abidjan by Saturday.
"Most garrisons in the country where there are ex-rebels have risen up, shooting in the air and looting in some places," a military source said, adding that better-equipped loyalist units, such as the special forces, had not joined the mutiny.
Donwahi had said in a televised address before heading to Bouake on Saturday that the situation was "understandable but regrettable".
"We are emerging from a crisis and our army is being rebuilt," the defence minister said.
"Things are not moving as quickly as we hoped but they are moving none the less."
A similar dispute over pay by rebels-turned-soldiers erupted in Bouake in November 2014 which spread to Abidjan and briefly brought the country to a standstill.
Bouake was the capital of a rebellion which erupted in 2002 in a failed attempt to oust then president Laurent Gbagbo.
The effective partitioning of the country between a rebel-held north and a loyalist south triggered years of unrest. Rebel forces generally backed Ouattara, the current president who took office in April 2011 after a bloody post-electoral showdown with Gbagbo that left 3,000 people dead.
Gbagbo was arrested and turned over to the International Criminal Court in The Hague, where his trial began in January last year for crimes against humanity.