Anwar was widely expected to succeed Mahathir Mohammad, but radical differences over ways to tackle the economic crisis led to him being sacked instead.

He then led massive street demonstrations to protest against his dismissal and demand Mahathir's ouster, and was subsequently arrested over allegations of corruption and sexual misconduct .

He was sentenced to six years for corruption and obstruction of justice in 1999. A year later, he was found guilty on a charge of sodomy, which is punishable under Malaysian law, and given a concurrent sentence of nine years. Anwar and his followers insisted that the charges were politically motivated.

Mahathir stepped down in October last year after 22 years in power, and his new deputy Abdullah Ahmad Badawi took over as prime minister.  

Mr Nice Guy replaces Mahathir 

Thursday's court decision, which came precisely six years after Anwar was sacked, is likely to boost Badawi's image as reformer, say analysts, particularly since he is known to be Anwar's political rival for a long time.

Speaking after the court overruled his conviction for sodomy, Anwar thanked Badawi for his release, saying "you've got to recognise the fact that his predecessor wouldn't have made this judgment possible. So in that regard, I have to give credit to the prime minister for not interfering with the judiciary."

Anwar, who is in a wheelchair owing to a back injury--which he claims is due to a beating by the then police chief after his arrest--now hopes to go to Germany for treatment.

Owing to his conviction for corruption, he is not allowed to seek public for five years.