A Russian court has unexpectedly freed protest leader Alexei Navalny pending his appeal against a five-year sentence on embezzlement charges, after his jailing prompted thousands to take to the streets in protest.
The judge in the northern city of Kirov ruled on Friday that keeping President Vladimir Putin's top opponent in custody would deprive him of his right to stand in mayoral elections in Moscow on September 8.
"What happened now is a completely unique phenomenon in the system of Russian justice," said Navalny, who was immediately set free from the glass-fronted defendants' cage and rushed to embrace his wife Yulia.
A lower court in the city of Kirov 900km northeast of Moscow had on Thursday sentenced Navalny to five years in a penal colony, in a decision that sparked international concern.
Navalny was found guilty of defrauding the local government in the Kirov region of 16 million rubles ($A547,345) in a timber deal while acting as an unpaid adviser to the local authorities in 2009.
Navalny's co-accused, Pyotr Ofitserov, who was sentenced to four years in prison, was also released on Friday pending his appeal.
Activists said the conviction was ordered by the Kremlin for Navalny daring to challenge Putin and late on Thursday thousands of his supporters filled the central avenues of Moscow and Saint Petersburg in protests.
The guilty verdict disqualifies Navalny from politics, but the restriction will come into force only if the verdict is upheld on appeal, leaving him still able to stand in the upcoming Moscow mayoral elections.
Navalny said he was not a "pet kitten or puppy" who could be first "kicked out of the elections" and then invited back.
He said he would decide upon his return to Moscow if he would continue his campaign or boycott the polls, where he was due to challenge pro-Putin mayor Sergei Sobyanin.
"If we have at least two more months to fight, we will fight," he added.
Many observers say the jailing of a high-profile mayoral candidate during the campaign was a huge embarrassment for the authorities and link the prosecutors' decision to appeal to a possible change of heart by the Kremlin.
The judge in his ruling on Friday said that Navalny's jailing would "limit his right to be elected" and put him at a disadvantage compared to other mayoral candidates.
More than 200 people were arrested after several thousand rallied near Manezh Square in central Moscow to protest Navalny's sentencing. All have now been freed with caution.
Navalny, who emerged as a powerful new force in mass protests in 2011-2012, said he wants to challenge Putin in the next presidential election in 2018 and coined the phrase "the party of crooks and thieves" to describe the ruling United Russia party.
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