Ms Carroll, a freelance reporter for The Christian Science Monitor, was kidnapped on January 7, in Baghdad's western Adil neighbourhood while going to interview Sunni Arab politician Adnan al-Dulaimi. Her translator was killed in the attack.
The 28-year-old reporter was dropped on Thursday at the door of the Iraqi Islamic Party headquarters in Baghdad's western Amiriyah district, by an unknown group.
"She is healthy and we handed her over to the Americans," Nasir al-Ani, a member of the Iraqi Islamic Party told The Associated Press.
Her employer confirmed the news. "She was released this morning, she's talked to her father and she's fine," said David Cook, an editor for the Monitor in
Washington.
Video interview
A video posted on the internet, which could not be independently verified, showed Ms Carroll in an interview apparently conducted by her captors before they released her.
"Did you think the American army or the CIA (Central Intelligence Agency) would save you at any time," a muffled male voice asked Ms Carroll in accented English.
"Sometimes I thought maybe that they might come, they might find me, they might find a way to know where I am and come get me," she answered.
"Why did not they save you?" asked the interviewer.
"I think the mujahedeen are very smart and even with all the technology and all the people that the American army has here, they still are better at knowing how to live and work here, more clever," she said
"Does this mean something to you?" the man questioning her asked.
"It makes very clear that the mujahedeen are the ones that will win in the end," Ms Carroll said in the video.
At the end of the eight-and-a-half minute tape, the same man read out a statement in Arabic.
"The mujahedeen in the land of the two rivers announce the liberation of the journalist Jill Carroll... after the US forces and the CIA failed to find her making their ineptitude obvious to the whole world," he said.
"We liberate this journalist today after the American government met some of our demands by releasing some of our women prisoners."
Ms Carroll was last seen in a videotape broadcast on February 9 by the private Kuwaiti television station Al-Rai.
Her captors, calling themselves the Revenge Brigades, had demanded the release of all women detainees in Iraq by February 26 and said Ms Carroll would be killed if that did not happen. The date came and went with no word about her welfare.
On February 28, Iraq's Interior Minister Bayan Jabr said Carroll was being held by the Islamic Army in Iraq, an insurgent group that freed two French journalists in 2004 after four months in captivity.
Ms Carroll's twin sister, Katie, on Wednesday pleaded for her release on Arab television.
"I've been living a nightmare, worrying if she is hurt or ill," she said in a statement read on the Al-Arabiya network.
Family elated
Ms Carroll’s family said it was elated by her release and expressed solidarity with the families of other hostages.
"Our hearts are full. We are elated by Jill's safe release," family members said in a statement read by editor Richard Bergenheim of The Christian Science Monitor.
"Our thoughts are with the families of others still being held hostage in Iraq and we hope that their loved ones will return safely to them soon."
Mr Bergenheim said there were no negotiations before Ms Carroll's release and he had no knowledge of US military involvement. Many others, however, were involved, he said.
"There have been people all over the world working night and day to obtain this result. Jill's fellow journalists, her good friends in Iraq and elsewhere in the Middle East, the Iraqi and American governments. Leading clerics throughout the Arab world and political leaders in Iraq have pursued every avenue possible," he said.
He urged that similar efforts be made to obtain the release of all hostages held in Iraq.
Noting that Iraqis are kidnapped daily, he said: "The world doesn't hear their voices or the voices of their families. They deserve attention and their freedom no less than Jill."
US President George W Bush said his initial reaction to the news was, "Thank God. I'm just really grateful she was released," he said.
Thousands of Iraqis have been kidnapped in the past three years, many for ransom.
More than 200 foreigners have also been taken prisoner. Many have been freed but others have been killed.
Ms Carroll is the fourth western hostage to be freed in eight days.
On March 23, US and British soldiers, acting on intelligence gained from a detainee, freed Briton Norman Kember, 74, and Canadians James Loney, 41, and Harmeet Singh Sooden, 32, from a house west of Baghdad.