The decision to free Amal Fathi came as her husband Mohamed Lotfy, also a human rights activist, received a Franco-German prize for his work.
Attorney Mohammad Ramadan said on Facebook that a Cairo criminal court ordered Fathi’s release on “probation”, which means she must still report to a police station at certain times.
Fathi remains in custody, and proceedings to clear her name could begin as soon as Wednesday unless the prosecutor appeals the court’s decision.
Rights watchdog Amnesty International welcomed the court’s decision and called on authorities to immediately comply with it.
“Today’s court decision to order the conditional release of Amal Fathi, who has unjustly spent the past seven months behind bars, offers a glimmer of hope that her agonizing ordeal in prison will come to an end soon,” Amnesty’s Najia Bounaim said in a statement.
“The Egyptian authorities must now comply with the court’s decision and ensure she is immediately released and reunited with her family,” Bounaim said.
“Releasing her on probation is not enough,” Bounaim added and called on authorities to drop all charges against Fathi.
Fathi, 33, was arrested in May after posting a Facebook video in which she accused authorities of failing to protect women and charging that guards at a bank had sexually harassed her.
Some 60 percent of women in Egypt said they had been victims of some form of sexual harassment during their life, in a 2017 report from UN Women and Promundo.
In September, Fathi was handed a two-year suspended jail sentence and fined 10 000 Egyptian pounds ($560 dollars) for spreading fake news.
She was, however, kept in detention awaiting trial in another case in which she is accused of “membership in a terrorist group”, another one of her lawyers, Doaa Mustafa, said in September.
Her husband, Lotfy, heads the Egyptian Commission for Rights and Freedoms which is closely watched by the authorities.
On Tuesday he received Franco-German Prize for Human Rights and the Rule of Law at a ceremony at the residence of the French ambassador in Cairo.