Steven Gallant fought off terrorist Usman Khan armed only with a narwhal tusk while on his first day release for an event for reformed prisoners at Fishmongers Hall in November last year.
Jack Merritt, 25, and 23-year-old Saskia Jones were both killed in the attack as they took part in the Learning Together scheme at the Hall – an event to help prisoners access education and skills.
Several others were also wounded while attacker Khan was shot dead by police.
Gallant, jailed in 2005 for murdering 33-year-old Barrie Jackson in a savage attack outside a Hull pub, helped restrain Khan despite him wearing a fake suicide vest and carrying two knives.
According to the Ministry of Justice, the Queen granted Gallant the rarely-used Royal Prerogative of Mercy, bringing his case before a parole board 10 months early.
The pardon must still get past the parole board before Gallant is considered for release, but it is highly unlikely this will be denied.
An MoJ spokesman said the pardon had been in recognition of his "exceptionally brave actions at Fishmongers’ Hall", which "helped save people’s lives despite the tremendous risk to his own".
The family of murder victim Mr Jackson humbly showed their support for the decision, saying Gallant had "clearly done his time" and describing the pardon as "fair enough".
Mr Jackson's son Jack, 21, told The Mirror: “In my mind, Gallant has nearly done his time and if someone has undergone rehabilitation and change, which it seems he has, then it’s fair enough.”
The father of Jack Merritt, 55-year-old David Merritt, said it was "fully deserved".
He said: "Steve fully deserves this pardon, or reduction in sentence.
“It is fantastic. He was very close to Jack and he turned his life around and reformed. I am really pleased for him.”
It is understood Gallant has been a model prisoner who has expressed remorse for his crimes and has not faced any punishment or loss of privileges for the past 10 years.
He has also participated in a number of interventions, including addressing previous substance abuse, and is in the process of studying for a business degree.
Barrie Jackson was killed by Gallant and another man, James Gilligan, who waited for him outside The Dolphin pub in Hull on April 24, 2005.
The two believed Mr Jackson had been involved in an assault on Gallant's girlfriend eight days prior.
The violent attack saw Mr Jackson have CS gas sprayed into his eyes before he was chased and beaten with a hammer and stamped on.
The attack on Jackson had been so violent, that paramedics were reportedly unable to find his distinguish where his mouth was.
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