North Korea's state news agency said Mr Newman was expelled on "humanitarian grounds" after confessing to "crimes" in the 1950-53 war and "apologising".
He had been held since October on charges of "hostile acts" against the North, while visiting as a tourist.
Although Mr Newman, 85, did serve during the Korean War, his family says he is the victim of mistaken identity.
The US welcomed Pyongyang's decision.
"We are pleased that Mr Merrill Newman has been allowed to depart the DPRK (North Korea) and re-join his family. We welcome the DPRK's decision to release him," said state department spokeswoman Marie Harf.
"I'm delighted to be home," Mr Newman said in San Francisco. "It's been a great homecoming. I'm tired, but ready to be with my family."
He thanked the Swedish embassy in Pyongyang and US embassy in Beijing for helping to secure his release.
Mr Newman - a pensioner from Palo Alto, California - had been held in North Korea since being taken off a plane as he prepared to leave the country on 26 October, following a 10-day tourist visit.
In a video released by North Korean authorities last week, Mr Newman was shown reading his alleged apology, dated 9 November.
It claims he was an "adviser of the Kuwol Unit of the UN Korea 6th Partisan Regiment part of the Intelligence Bureau of the Far East Command" - an apparent reference to one of the special operations units acting against the North.
Mr Newman allegedly confessed to trying to contact surviving soldiers during his trip as a tourist.
The statement added: "Please forgive me."
But Mr Newman's family said there must have been "some dreadful misunderstanding".
Another veteran, also named Merrill Newman, was awarded a Silver Star medal for his efforts during the Korean War.
The North Korean authorities have previously been accused of coercing confessions from detainees.
US Vice-President Joe Biden, while welcoming North Korea's release of Mr Newman as "a positive thing", renewed calls for Pyongyang to free another American, Kenneth Bae, held since November 2012 and sentenced in May to 15 years' hard labour.
Pyongyang said Mr Bae - described as both a tour operator and Christian missionary - had used his tourism business to plot sedition.
US veteran of the Korean War Merrill Newman has arrived in San Francisco after being released by North Korea.