Tobias Friedrich Moran, accused of murdering his German backpacker girlfriend in 2005, has been granted bail after prosecutors decided not to appeal against his release.
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The 42-year-old can now return to his wife and family in City Beach, Western Australia, from where he was extradited.
Bail conditions state he must surrender his passport, report to police three days a week and is banned from using encrypted communication tools such as WhatsApp.
Police have been granted powers to seize and search his phone.
The NSW Office of the Director of Public Prosecutions on Thursday night said it had "considered the matter and determined not to make a detention application in relation to Mr Moran".
Magistrate Margaret Quinn in the Downing Centre Local Court on Thursday accepted submissions from Moran's barrister there was no new evidence connecting him to the murder of Simone Strobel 17 years ago.
On Wednesday prosecutor Kim Gourlie said statements taken from people in Germany showed Moran lied to police about events surrounding Ms Strobel's death, alcohol drunk, the clothing she was wearing and the "nature of their relationship".
The magistrate said there was evidence pointing to Moran's aggression towards his partner who he had been fighting with at the time, and that drugs may have been involved.
"(But) it doesn't appear in this case to be any direct or indirect evidence connecting him to the offence," Ms Quinn said, when granting bail.
"It's not the strongest circumstantial case I have seen."
The 42-year-old is charged with murdering his then partner and acting with intent to pervert the course of justice between 11pm on February 11, 2005 and 3.30pm the following day.
Police allege Moran suffocated or smothered his girlfriend in a camper van in Lismore and disposed of her body nearby.
Moran told police his partner had gone off for a walk at 10.45pm at night and he reported the school teacher missing the following day.
Her body was found days later 100 metres away from the camper van they had been staying in, too decomposed for a coroner to determine the cause of death.
It is believed to be asphyxiation.
Defence barrister Tim Game SC argued it would be "insane" of Moran to dump the body 100 metres away from where he is accused of murdering her, before booking back into the same campsite with his two alleged accomplices.
The magistrate disagreed with the Crown's submission that Moran had not co-operated with police, acknowledging he had refused to show up for an inquest in 2007.
But he had submitted plenty of DNA samples to police, one of which was lost, and most recently put himself forward for extradition, she said.
Police last week confirmed they were communicating with German authorities about two arrest warrants for suspects who had been "persons of interest from the very beginning".
Moran's sister Katrin Suckfuell and friend Jens Martin were also travelling with the pair.
Mr Game told the court he had been preparing for another inquest, following one in 2007, before his client was criminally charged.
The matter is next listed before the Lismore Local Court on September 28.
Australian Associated Press
