Mahn Nyein Maung is a senior figure in the Karen National Union (KNU) and was arrested last year trying to cross from northern Burma to China.
A spokesperson for the KNU says he will now be sent back to Thailand.
Burma’s government says the KNU is illegal, but signed a ceasefire agreement with the group in January.
It has recently held initial peace talks with other armed ethnic minority groups to try to put an end to decades of tension in the country.
Kyi Mint, Mahn Nyein Maung’s lawyer, told the Reuters news agency his client is “expected to take part” in new peace talks between the KNU and the government in April.
The Karen National Union has been fighting the central government since Burma’s independence from Britain six decades ago.
Largely Christian and favoured by the British during the years of colonial rule, the Karen rebelled against what they saw as repressive treatment by the Burmese nationalist military.