The German court freed the 91-year-old man pending his appeal against his conviction and sentence for crimes he committed as a guard at the Sobibor concentration camp in Nazi occupied Poland.
Presiding Judge Ralph Alt cited Demjanjuk's age and that he posed no danger to the public as reasons to justify his release.
But Efraim Zuroff, who still pursues ageing criminals as chief Nazi hunter at the Simon Wiesenthal Center, expressed his disappointment over the judge's decision to free Demjanjuk.
"Until I heard the news of his release I was satisfied as the verdict sent a very powerful message that Nazi war criminals will eventually face justice but now I have my reservations," he told the Daily Telegraph.
"He was released on the basis of age but we think that is irrelevant. The people he sent to death in Sobibor didn't have that privilege, and he should be behind bars."
Earlier, sitting in a wheelchair in the Munich courtroom, Demjanjuk had remained impassive as the court delivered its verdict, and had earlier waived the right to make a final statement.
Jude Alt said that it was clear that Demjanjuk had played a role in the extermination of thousands at the Sobibor camp, adding that he was a piece in the Nazi "machinery of destruction".
"The court is convinced that the defendant ... served as a guard at Sobibor from 27 March 1943 to mid September 1943. As guard he took part in the murder of at least 28,000 people," the judge said in a closing statement on the 18-month trial.
The verdict was welcomed by Avner Shalev, chairman of the Yad Vashem Holocaust museum in Jerusalem.
"While no trial can bring back those that were murdered, holding those responsible to justice has an important moral and educational role in society," he said in a statement.
Born in Ukraine, Demjanjuk always protested his innocence claiming that he had been a POW after being captured by the advancing German army in 1942.
He later moved to the United States, working in an Ohio car factory.
Although there was no evidence that Demjanjuk committed a specific crime, the prosecution was based on the theory if he was at the camp, he was a participant in the killing, an unprecedented legal argument made in the Germany courts. It produced an SS identity card carrying a picture of a young Demjanjuk as a key piece of evidence.
The conviction and release comes as the latest chapter in a 30-year legal drama.
1980s he was convicted and sentenced to death for being Ivan the
Terrible, a sadistic guard at the Treblinka death camp, but had the
verdict overturned owing to a case of mistaken identity.
Source: Daily Telegraph