A firebrand preacher once described as "Osama bin Laden's right-hand man in Europe" was granted bail by an immigration tribunal.
Abu Qatada, who last month defeated the Government's efforts to deport him to Jordan, will be subject to a 22-hour curfew when he is released.
Home Secretary Jacqui Smith said she was "extremely disappointed" at the decision and promised "all step
s necessary to protect the public".
The bail decision by the Special Immigration Advisory Commission (SIAC) is a fresh blow to the Government's anti-terror policies.
Now the Home Office, which is appealing against the decision to block the deportation, will seek the strictest possible conditions on the preacher once released.
Qatada has been convicted in his absence in Jordan of involvement with terror attacks in 1998.
The radical cleric once called on British Muslims to martyr themselves, and tapes of his sermons were found in a flat in Germany used by some of the September 11 hijackers.
Ms Smith said: "I am extremely disappointed that the courts have granted Abu Qatada bail, albeit with very strict conditions.
"Public safety is our main priority and we will take all steps necessary to protect the public."
He is currently being held in a specialist unit at Long Lartin in Worcestershire.
Shadow home secretary David Davis said: "The Government should at last answer our calls to focus on prevention and prosecution – for example by allowing the use of intercept evidence in court – rather than just trying to deport these individuals once they are here.
"They should establish a dedicated UK Border Police to prevent foreign terror suspects from entering the country in the first place."
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