Agca's lawyer Mustafa Demirbag told reporters in his office the GATA military hospital in Istanbul had decided against sending his client into the army because he had served a lengthy time in jail.
"Agca is exempt from military service," Mr Demirbag said, recalling a legal provision which scraps military service for those who have served more than five-and-a-half years in jail.
"Agca is now a free ordinary person like everybody else," he said.
Television reports suggested earlier that Agca, a draft dodger, underwent a series of physical and psychological tests at the hospital to determine whether he could do military service that is obligatory for Turkish men over 18.
But Mr Demirbag denied the reports and said his client went to the hospital only to hand in some documents required by authorities.
Evaded media
Agca's visit to the hospital was his first public appearance in five days since his release from a high-security jail Thursday last week.
The former hitman managed to dodge the army of reporters at both entrances of the hospital upon his arrival, but was later spotted as he left one building in the complex to go into another one, the report said.
At the weekend, local authorities warned Agca that he would be forcibly taken to the hospital if he did not came upon his own will by Wednesday.
Agca had disappeared only a few hours after his release from prison when he was whisked out through a backdoor at the GATA hospital and driven away to an unknown destination.
The hospital decision leaves the 48-year-old Agca a free man after nearly a quarter of a century behind bars, but he still risks being ordered back to jail after a review of his case by the country's appeals court.
Appeals court
Turkish Justice Minister Cemil Cicek said that he would soon ask the appeals court to study Agca's case files to resolve a raging debate on whether he had served less time than he had to.
"I will allow the case to be analysed... once again by sending a written order to the appeals court, most probably tomorrow," Mr Cicek said after a cabinet meeting in Ankara.
Agca first came to public attention in Turkey in 1979, when he shot and killed one of Turkey's most prominent journalists, Abdi Ipekci, the chief editor and columnist of the liberal daily Milliyet.
He escaped from the prison where he was awaiting trial and showed up at St Peter's Square, Rome, on May 13, 1981, where he shot and seriously wounded John Paul II.
After 19 years in Italian prisons, he was freed on an Italian presidential pardon and extradited to Turkey in 2000.
He was jailed for the Ipekci murder and two bank robberies committed in the 1970s, but benefited from a series of amnesties, sentence reductions and penal code amendments to be freed after just five and a half years.
Former Justice Minister Hikmet Sami Turk, who oversaw Agca's extradition from Italy, said he should have remained in jail until 2012 even with the most optimistic calculation of his sentence reductions.