Judge Gustavo Amarilla also released Ronaldinho's brother Roberto de Assis Moreira, who likewise had been held for a month in jail and another four months under house arrest in a hotel in Paraguay's capital, Asuncion, for the same charge.
The 40-year-old former World Cup winner "is free to travel to whatever country in the world he wants but he must inform us if he changes his permanent residence" for a period of one year, the judge said.
"He has no restrictions except for the fulfilment of reparations for damage to society."
Dressed in jeans, a black beret and black shirt, Ronaldinho accepted the terms of his release, which include payment of $90,000 in damages. His brother, who is also Ronaldinho's business manager, must pay $110,000.
The judge stressed that he was not issuing a "definitive dismissal" of the case but rather that Ronaldinho was benefitting from a "conditional suspension of the procedure."
His brother, on the other hand, was given a two-year suspended sentence.
Prosecutors said they did not believe Ronaldinho took part in the plan to manufacture the fake Paraguayan passports but believed de Assis Moreira was aware that the passports were false.
"They flagrantly used a public document containing false content," said Marcelo Pecci, one of the public prosecutors, who said it was a "very serious" offense.
De Assis Moreira must appear before a judge in Brazil every four months for two years and will have a criminal record.
"Ronaldinho's situation is not the same as Roberto's. He has no obligation to appear before any Brazilian judicial authority. He must only report a change of address," said Amarilla, who accepted a recommendation by four prosecutors to avoid the need for an oral trial.
Before Monday's trial the public prosecutor said that Ronaldinho displayed no "personal characteristics or criminal behavior that ... would put society at risk."
DECEIVED VILELY
The brothers arrived in Paraguay on March 4 with Ronaldinho, the 2005 Ballon d'Or winner, due to take part in an event in support of disadvantaged children.
However, two days later, the pair were taken into police custody when investigators raided their hotel following the discovery they had fake documents.
Before the judge announced his decision, the defense issued a statement insisting on the innocence of both brothers.
"They presented Paraguayan documents to migration authorities believing they were authentic," said the statement. "The people they trusted deceived them vilely."
After being held in a police station in Asuncion, where Ronaldinho celebrated his 40th birthday on March 21, the two men had been under house arrest for more than four months in a luxury hotel in the capital, on bail of $1.6 million.
The investigation has since expanded into a case of possible money laundering and criminal association.
Some 18 people have already been arrested in connection with the case, most of them immigration officials or police officers.
"The investigation found no indication that either participated in money laundering or criminal association," said the defense statement.
Ronaldinho, considered one of the greatest footballers of all time, was crucial in Brazil's 2002 World Cup win.
He played for European giants such as Barcelona, AC Milan and Paris Saint-Germain during a hugely successful 10-year stint in Europe.
He won the Champions League and two La Liga titles with Barcelona and Serie A with Milan.
After returning home to Brazil he won the Copa Libertadores -- South America's equivalent of the Champions League -- with Atletico Mineiro.
