Aisyah and Thi Huong were accused of smearing VX nerve agent on Kim's face at Kuala Lumpur airport two years ago.
The prosecution had moved to throw the case out in August previous year, but the judge ruled that the women should testify. The Indonesian Law and Human Rights Ministry released an image of an undated letter in which it requested that Aisyah be freed.
Indonesian Ambassador Rusdi Kirana thanked the Malaysian government for Aisyah's release and said: "We believe she is not guilty".
The women, in their 20s, had always denied murder, saying they believed they were taking part in a prank and were tricked by North Korean agents into carrying out the Cold War-style hit using VX nerve agent. "I did not expect it", said the 27-year-old, who earlier hugged her tearful Vietnamese co-accused, Doan Thi Huong, in the dock when the news was announced.
"I am very happy, I never expected that today I will be freed", she said at a press conference with representatives of the Indonesian government in Kuala Lumpur on Monday, which was aired live by Kompas TV.
The charge was "vague" and the prosecution "has failed to make out a prima facie case against the accused (Aisyah)", he said.
Jong Nam fell out of favor with their father, former North Korean leader Kim Jong Il, almost two decades ago and lived in self-imposed exile in the Chinese-controlled territory of Macau.
Two months later in August, a judge ruled there was sufficient evidence the suspects had engaged in a "well- planned conspiracy" with four DPRK citizens to murder the man, and ordered that the trial continues to the defense stage.More news: Naomi Osaka gets revenge against Kristina Mladenovic at Indian Wells
Originally, Huong was expected to read a statement to the court on Monday, which would have been the first time either of the pair gave testimony.
Huong's lawyer, Hisyam Teh Pok Teik, added that she was "traumatized by what happened in court".
"I did not expect it", a visibly elated Aisyah told reporters as she was ushered into a vehicle outside the court. "Siti is innocent. That's why we keep praying for her", she said.
Shock and delight rippled through the Indonesian town of Sindangsari Monday as residents got word that a local woman accused of assassinating the North Korean leader's half-brother had been freed.
The trial against Huong, however, will continue on Thursday.
Aisyah's attorney, Gooi Soon Seng, also hailed the decision.
The Vietnamese government has not been as demanding about the release of Huong, who is still in detention. "My mind is blank", she told reporters after Aisyah left. This means Aisyah has not been formally cleared of the charge and could in theory be arrested on suspicion of Kim's murder again.
But their lawyers argued the four North Koreans were the masterminds, and provided the women with poison on the day of the murder before fleeing.