Arnaldo Otegi, leader of Basque nationalist party Batasuna, walked free from Madrid's High Court today after the state prosecutor dropped charges against him, a court spokeswoman said.
Earlier, Otegi had been brought by plane to Madrid after being arrested by hooded police after he had claimed he could not make the court hearing because of snow on the roads.
The prosecutor had demanded 15 months in prison for Otegi but later dropped the charges, meaning the Basque leader goes free and the government braces for further criticism from the opposition Popular Party.
A cameraman saw hooded police arrest Otegi at his home in the Basque town of Elgoibar and drive him off after the High Court issued a ruling ordering them to bring the nationalist before them.
A crowd of about 20 supporters chanted "Arnaldo, the people are with you" in the Basque language during the military-style operation in which police armed with sub-machine guns and accompanied by dogs pulled up in four-wheel drive vehicles.
Batasuna is banned because of links to Basque nationalist rebel group ETA, whose members have killed more than 800 people in four decades fighting for independence of the Basque Country in northern Spain and southern France.
The government broke off peace talks with ETA at the end of last year after the rebels killed two people in a bomb blast at Madrid airport.
Otegi's court appearance took place as Batasuna, supported by about 15 per cent of Basques, seeks a way to take part in regional elections in May despite the ban on its political activity.
It looks unlikely the authorities will permit this so soon after the fatal ETA bombing.
Spain's Socialist government also faces criticism from opposition conservatives who opposed peace talks and said authorities gave in to terrorism by granting house arrest to a hunger striking former ETA commander earlier in March.
Government officials believe ETA has been seriously weakened by hundreds of arrests in recent years and now consists of only a few dozen active fighters.