Calling the prosecution case "exceptionally weak", the judges said Gbagbo had given assurances he would return to the Hague-based court if ordered to do so.
Gbagbo spent more than seven years in custody during his trial, which dealt with allegations of involvement in election- related violence in Ivory Coast in 2010 and 2011 in which some 3,000 people were killed.
Wednesday's decision paves the way for the speedy release of Gbagbo and co-defendant Charles Ble Goude from a detention facility in The Hague.
Presiding Judge Cuno Tarfusser said two out of three judges believed the case against Gbagbo and his co-defendant to be so weak that it was unlikely their acquittals would be overturned on appeal.
The two men will be released after "logistical and diplomatic arrangements" have been made, Tarfusser added. Discussions were continuing with court member states. (Reporting by Stephanie van den Berg; Writing by Anthony Deutsch; Editing by Gareth Jones)