The Bavarian criminal police office reported on Friday that they had released the two men after not being able to find evidence to confirm suspicions they were plotting a terror attack.
Special police forces had arrested a 29-year-old Nigerian man and a 46-year-old Iraqi man in Munich on Thursday morning, one at a sports betting shop near the central train station and the other at an S-Bahn train station.
Police had also believed the men could have had contact with members of the Isis terror group.
Officers interrogated both men and searched through their apartments, including analyzing their cell phones and computers, according to Spiegel Online
"Through the course of the extensive investigation, we could not corroborate or confirm that there was a serious or dangerous act of violence planned," a spokesperson for the Bavarian criminal police office told Spiegel Online.
Spiegel said that it learned the tip on the two men actually came from the US National Security Agency (NSA).
According to Spiegel, the NSA first informed the German Foreign Intelligence Service (BND) about two German phone numbers that had been in contact with other cell phones linked to a group of Islamic extremists who were planning an attack in Munich for either Thursday or Friday.
This intelligence was passed from the BND to the German Criminal Police Office (BKA), and then ultimately to Bavarian officials.
The Iraqi man told police that he still had contact with two cousins through messaging apps WhatsApp and Viber, one of whom was still in Iraq and the other who had fled to Greece with his family. But neither of the relatives were connected to terrorism, according to Spiegel.
Interior Minister Thomas de Maizière said of the arrests that it was "the right thing" to investigate the men.
"When in doubt, it is better to act earlier rather than later," the minister said.
Prosecutors said they would continue their investigation despite the setback.