Ostreicher's wife and daughter testified before the panel and retold what they knew about the case.
Bolivian prosecutors have accused Ostreicher of money laundering, though formal charges are yet to be filed.
Jacob Ostreicher wore a white bulletproof vest as he spoke with reporters after the hearing.
Ostreicher was arrested in June 2011 on suspicion of money laundering tied to a rice-growing operation.
Word of Ostreicher's release was posted on the "Free Jacob Ostreicher" Facebook page Tuesday.
Demonstrators outside the courthouse Tuesday both advocated and denounced Ostreicher, CNN affiliate Bolivision reported.
But members of Bolivia's Jewish community said Ostreicher, an Orthodox Jew from Brooklyn, had been unjustly accused.
Bolivian authorities arrested six government officials last month, accusing them of trying to extort and steal from Ostreicher.
Speaking to reporters Tuesday, Ostreicher said his case was only one of many in the South American country.
The businessman, Jacob Ostreicher, was kept in jail for 18 months, accused of money laundering and drug trafficking.
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Prison authorities have initiated a separate investigation into media interviews Ostreicher has done.
Ostreicher is nearly two months into a hunger strike to protest his imprisonment.
Smith and U.S. Rep. Nydia Velazquez, D-New York, praised Ostreicher's release as the "first positive development" in the case.
Smith traveled to Bolivia this week to meet with Ostreicher in prison and to accompany him to a hearing Monday.
After the hearing, an ambulance transported Ostreicher to a clinic where he is being treated for Parkinson's disease, ABI reported.
The detention of Ostreicher, who at one point went on a hunger strike to protest his imprisonment, drew international attention.
Meanwhile, Ostreicher's case is getting more local and international media attention.
In short, Ostreicher traveled to Bolivia to check on a woman who had been hired to run a rice operation that he and others had invested in.
Jacob Ostreicher, a 53-year-old flooring contractor from Brooklyn, New York, has been held at the notorious Palmasola prison in Santa Cruz, Bolivia, since June 2011 on suspicions of money laundering.
Ostreicher says he was unjustly ensnared in the investigation.
Prosecutors told CNN in September that they are suspicious of Ostreicher because of the lengths he went to to try to recoup the investors' losses and his continued negotiations with the landowner.
Ostreicher and his family have claimed from the beginning that he is innocent, and presented a judge what they say is evidence that all of the money invested in a rice growing operation came from legal sources.
Smith this month wrote a letter to Roberta Jacobson, assistant secretary of state for western hemisphere affairs, asking her to publicly advocate on Ostreicher's behalf during the General Assembly of the Organization of American States which took place in Bolivia last week.
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