India had earlier said it won't be involved in any bargain to get the pilot back even as Pakistan foreign minister Shah Mahmood Qureshi told the Pakistani media that the government would be willing to handover the Indian pilot if India promised to "de-escalate" the situation.
Pakistani officials handed over Varthaman to Indian officials, including from the IAF, at the Attari-Wagah Border late Friday.
Pakistani and Indian officials completed the handover process in the presence of some independent global observers, the reports said.
Officials say two siblings and their mother have been killed in cross-border shelling between Indian and Pakistani soldiers in disputed Kashmir.
Pakistan's military said its air force shot down two India Air Force jets in its airspace and captured a pilot on the ground in Pakistan-administered Kashmir on February 27. Pakistani Prime Minister Imran Khan on Thursday said he would seek Turkey's help in defusing tensions and talk to Recep Tayyip Erdoğan.
India's foreign ministry had demanded the pilot's immediate release and said his treatment was a "vulgar display of an injured personnel of the Indian Air Force in violation of all norms of worldwide humanitarian law and the Geneva Convention". On February 27, Pakistan's planes attacked military targets in Jammu and Kashmir.
Wing Commander Abhinandan also criticised the Indian press, saying they always exaggerate and say a lot of damaging things that mislead people.
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To have that awareness to take the touch and, with your back to play, back-heel it over the keeper, it was unbelievable skill. Liverpool had drawn three of their previous four league games, but never looked like dropping points on Wednesday.
Pakistan retaliated, shooting down two Indian aircraft on Wednesday and capturing the pilot. At an election rally in Tamil Nadu, the pilot's home state, Modi said, "Every Indian is proud that fearless Wing Commander Abhinandan Varthaman is from Tamil Nadu".
A pilot shot down in a dogfight with Pakistani aircraft returned to India on Friday, after being freed in what Islamabad called a "peace gesture" following the biggest standoff between the two countries in years. It said other airports, including one located in the eastern city of Lahore that borders India, will remain closed until March 4. The closures snarled air traffic.
Since Friday morning, it was expected that Abhinandan would be released by Pakistan anytime after noon.
The disputed Himalayan region of Kashmir has been at the root of two of the three wars fought between India and Pakistan since they gained independence from Britain in 1947.
The launch of a dialogue between Pakistan and India depends on New Delhi since Islamabad is ready to sit at the negotiating table whenever its neighbor is willing, Pakistani Ambassador to Russia Qazi Khalillulah told Sputnik on Friday.
India's MiG-21-93 fighters, eventually named MiG-21UGP Bison, were upgraded to be equipped with a new radar, wider range of weapons, modern indicators on the windshield, helmet-mounted sights and multifunctional display screens in the cockpit.
People in Pakistan and India feel that dialogue and not war is the only way to settle all disputes between the two countries.