Three men were arrested for abducting the man about 13 days ago outside a wedding hall that he owned, deputy intelligence chief Abdullah Laghmani told reporters.
"We received information yesterday that he is an area outside Kabul. We launched an operation at two o'clock and we freed him at four o'clock," he said.
Jens Plötner, spokesman for the German Foreign Ministry, said the man was in relatively good condition considering his ordeal. "We can confirm the German-Afghan citizen is free as of this morning," he said in Berlin.
The abducted man, named Haji Azizullah, told the same media briefing that his captors had demanded $3 million for his release. "They threatened to cut off my hand and my ear if the payment wasn't made," he said.
Kidnappings by criminal gangs seeking ransom have soared in Afghanistan as security has deteriorated since the 2001 ouster of the Taliban government.