Oleg Navalny embraced his wife and then his older brother after leaving a prison camp in the village of Naryshkino, in the Oryol region south of Moscow, an AFP photographer at the scene said.
Around 50 supporters and journalists had gathered outside the prison for the release.
The younger Navalny said he was looking forward to going home and eating shashlik, or kebab.
Oleg and Alexei were convicted in a 2014 fraud trial related to their work for French cosmetics company Yves Rocher.
The opposition politician received a three-and-a-half-year suspended sentence while his brother was jailed for the same amount of time in a move activists compared to hostage taking.
The European Court of Human Rights ruled the convictions were "arbitrary and unreasonable" and ordered Russia to pay the pair 83,000 euros ($98,000) in damages and costs.
Alexei Navalny posted a video of his brother's release on Twitter on Friday, with the caption, "Free!".
The older Navalny brother, a constant critic of President Vladimir Putin, has served repeated short jail sentences in connection to his political activities.
He most recently served a 30-day sentence for organising an unsanctioned protest against Putin's inauguration for a fourth Kremlin term, and was freed the day the World Cup started in Russia this month.
The 42-year-old built up a network of activists around the country with a view to running against Putin in the March polls, but was barred from standing because of his criminal record.
In 2013, the charismatic Yale-educated lawyer stood for Moscow mayor with a Western-style campaign and a message of snuffing out corruption, coming second against a Kremlin-backed incumbent.
photo-tm/wdb
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