The president’s surprise decision came as the UN Secretary General, Ban Ki-moon, visited the impoverished southern African country.
Homosexual acts are banned in Malawi.
Last week, a judge in the commercial capital Blantyre sentenced Monjeza and Chimbalangato 14 years with hard labour after finding them guilty of gross indecency and “unnatural acts” for having a gay relationship.
The pair’s conviction and sentence – the maximum sentence for such an offence in Malawi – had sparked an international outcry and drawn fire from Western donors.
Mutharika said he was releasing the men immediately on humanitarian grounds, while still insisting: “These boys committed a crime against our culture, our religion and our laws.”
Ban said he welcomed the president’s decision.
Monjeza and Chimbalanga were arrested in December last year as they were openly celebrating their engagement, causing a sensation in the conservative, predominantly Christian country of 13 million.
In handing down his sentence the judge said he was imposing a “scaring” so that “the public be protected from people like you, so that we are not tempted to emulate this horrendous example.”
Human rights activists pointed out that the couple were not causing harm to anyone else and that Malawi’s constitution bars discrimination on the basis of sex.
Many ordinary Malawians had, however, cheered the judge’s hardline stance, saying the men had acted in a manner that was “un- Malawian.”
The president had also spoken out against homosexuality on public platforms.
Malawian’s views on homosexuality are shared by many people in Africa, where gays suffer widespread discrimination, repression and, sometimes, violence.
The parliament of the central African nation of Uganda, where homosexuality is already prohibited, is considering a bill that would increase the penalties for homosexual acts from 14 years in jail to life, or even the death penalty, for some acts.
Zimbabwe’s President Robert Mugabe has described gays as “worse than dogs and pigs. DPA