Gregorio Pio Catapang, chief of the Armed Forces of the Philippines, said the hostages were released at around 8.50 p.m. and received medical check-up half an hour later at a military camp, Xinhua reported.
He said the freed hostages — Viktor Okonek, 71, and Henrite Dielen, 55 — will be transported to Zamboanga city in a naval vessel.
He said a naval clinic and bed facilities are being prepared for them while they wait for a flight to Manila.
Earlier, Abu Sayyaf spokesperson Abu Rami said in a phone interview with Radio Mindanao Network, a local radio station that the hostages were released in Patikul, Sulu, after ransom was paid.
The German couple had been in captivity since April, when they were taken away by the militants from their yacht off the western Philippine province of Palawan.
The Abu Sayyaf militants had demanded the payment of 250 million pesos ($5.57 million) ransom and that Germany refrained from supporting the US-led attack against the Islamic State (IS) terrorist group in Syria and Iraq.
The group threatened to behead the hostages if the demands were not met Oct 10. It later extended the deadline to Oct 17.
On Wednesday, the Islamist group expressed its willingness to withdraw the ultimatum if negotiations with Philippines Foreign Minister Alberto del Rosario were started.
But both the Philippines and German governments said they would not waver from their policy of not negotiating with terrorists.
“Neither the Philippine nor the German government have made contact with us,” Abu Sayyaf spokesperson, Abu Rami, told the Inquirer daily.
The rebels’ move to release the hostages came after Philippine authorities Friday gave the green light to the police and the army to attempt the rescue of two German hostages.
“The operation will begin at any moment, but we are identifying the exact location of some of the Abu Sayyaf leaders and members,” said Col. Allan Arojado, the army commander on Jolo island where the hostages are believed to be held.
The army sent a special unit tasked with law enforcement operations to join the seven battalions on Jolo island located some 980 km south of Manila, Spanish news agency Efe reported.
“We will do everything not to endanger their lives,” Arojado added.
Okonek, who had asked both governments for help on several occasions, spoke to the media again Thursday.
On Wednesday, the Philippine terrorist group released a photo showing the doctor seated inside what was allegedly his grave with his hands tied behind his back and a flag associated with Al Qaeda in the background.
According to an earlier report Friday, the Armed Forces of the Philippines (AFP) said they would not negotiate with the Abu Sayyaf rebels.
An AFP official made the announcement as Abu Sayyaf was calling for the withdrawal of government forces in Sulu as one of the conditions not to behead one of the German captives, The Manila Times reported.
Abu Sayyaf, formed by about 400 rebels, have held two other European hostages — a Dutch citizen and a Swiss — since 2012, along with a Malaysian coast guard and a Chinese woman and her daughter.
The group was created in 1991 by a handful of Afghanistan war veterans who had fought against the former Soviet Union, and is responsible for some of the bloodiest attacks in recent years in the Philippines, along with numerous kidnappings with which the group finances itself.