Pope Benedict XVI's butler was released from a Vatican cell and placed under house arrest on Saturday as he awaits a ruling on whether he should stand trial for leaking confidential papers.
"His detention is no longer necessary," Vatican spokesman Federico Lombardi told reporters, adding that the ruling would come by early August at the latest.
Paolo Gabriele "will reside at home with his family in the Vatican", he said.
Gabriele's lawyer meanwhile said his client believed his was "an act of love" for the pope and a bid to make the Catholic Church "more alive". He stressed that Gabriele had acted alone and not as a part of any Vatican "plot".
Lombardi also said a committee of cardinals that has questioned 28 lay people and clergy in the the "Vatileaks" scandal had submitted a report to the pope but did not give further details, adding only that Gabriele remains the sole suspect.
Gabriele, 46, was arrested on May 23 after an Italian investigative journalist published hundreds of secret documents that revealed a series of fraud scandals in the Vatican and an atmosphere of intrigue between rival groups of cardinals.
The Vatican said after his arrest it had found documents and copying equipment in Gabriele's home in an investigation that has shocked the close-knit community of the Holy See where Gabriele was seen as a trusted aide to an ageing pope.
Gabriele, known as Paoletto, has worked for the pope since 2006 and was one of a select few with access to the pope's private chambers. He was often seen by Benedict's side on foreign visits, assisting him and riding in the "popemobile".
His home is within the Vatican walls and Gabriele will be allowed to leave his house only to attend mass, Lombardi said, adding that he would be able to receive "spiritual and medical assistance" while awaiting the judge's ruling.
He is accused of "aggravated theft" and faces up to six years in prison.
Gabriele's lawyer Carlo Fusco said that his client would "presumably" have to face trial, adding that he had acted "under pressure on various fronts" such as stress at home and at work although he did not elaborate.
Fusco said however that Gabriele had acted alone and that he believed his actions were "an act of assistance, an act of love" towards the pope.
"There are definitely no networks, no internal or external plots in which Paolo was involved. His motivations were all internal," Fusco said.
"He wanted the Church to be more alive. He had an idea to help a situation that he thought he could improve. He acted out of idealism," he said.
Several Vatican watchers have said that Gabriele must have had at least some help and there is a suspicion that he acted sincerely but was then manipulated as part of long-standing feuds within the secretive Vatican administration.
Fusco also said Gabriele intended to ask the pope for forgiveness but that this was a personal matter between the two. Under Vatican laws, a pardon from the pope could come at any moment during the investigation or trial process.
The journalist who published the leaks has not named Gabriele as the source but says his source wanted to reveal Vatican corruption and highlight criticism of the powerful Vatican number two, Secretary of State Tarcisio Bertone.
Lombardi said earlier that the pope felt wounded by his butler's betrayal.
"It is a trial for him. He is suffering but also desires to understand, shed light on the matter and discover the truth," he said.
"He is particularly hurt with regard to one person, Paolo Gabriele, who he was close to, who he knew, loved and respected," he added.