The 60-year-old exiled leader of the Muttahida Qaumi Movement (MQM) was arrested on June 3 from his north London home and taken to a central London police station for questioning.
"The 60-year-old man arrested on Tuesday June 3 on suspicion of money laundering has been released on police bail to a date in July pending further enquiries," a police statement said without naming Hussain. Hussain was questioned for seven hours last evening, BBC reported.
He was transferred to a hospital for check-ups after being arrested on Tuesday. He returned to Scotland Yard custody yesterday after spending three days in the hospital. The police said Hussain's move back from hospital to detention was agreed after consultation with the Wellington Hospital, where he had been receiving treatment.
Hussain was arrested on suspicion of money laundering
Investigations are continuing into the case and Hussain is due to report to police again in July. Thousands of his supporters have been staging a protest rally in Karachi - Pakistan's biggest city and the MQM's power base. The news of Hussain's release prompted wild celebrations in the city, media reports said.
Hussain has lived in the UK since the early 1990s, saying his life would be at risk if he returned to Pakistan. He has since become a British citizen. According to some media reports, Scotland Yard had begun a money laundering probe against Hussain after they recovered some funds from his home with an unclear source.
Officers had searched the premises in Edgware area of north London. Hussain has been under investigation for money laundering worth at least 400,000 pounds, for inciting violence and in connection with MQM leader Dr Imran Farooq's murder.
His London residence was raided on money-laundering suspicion in 2012 and 2013 by British police. The MQM, formed in 1984, largely represents descendants of Urdu-speaking migrants from India who settled in Pakistan when it was created in 1947.