The 40-year-old leader was granted bail after spending nearly 16 months in the Chanchalguda Central Jail.
Special CBI court judge U Durgaprasada Rao granted bail to Jaganmohan Reddy on a personal bond of Rs two lakh and two securities of the like amount.
The judge directed Jaganmohan not to leave Hyderabad without the court's permission and not to directly or indirectly induce or influence the witnesses. Besides, he was asked to be present before the court during the proceedings in the case.
The court said CBI can approach for cancellation of bail if Jaganmohan violates any of these conditions.
The case relates to investments made by various companies in Jaganmohan Reddy's firms as quid quo pro for various favours bestowed on them during the tenure of his father Y S Rajasekhara Reddy as Chief Minister between 2004 and 2009.
There were celebrations in the court premises soon after the order was read out with YSR Congress supporters and workers bursting firecrackers and exchanging sweets.
Jaganmohan's wife Bharathi and several YSR Congress leaders were present in the courtroom.
Later, YSRC spokesman Ambati Rambabu expressed full faith in the judiciary and said their leader will come out clean after the trial.
Earlier, the CBI opposed Jaganmohan?s bail petition contending that the Kadapa MP, if enlarged on bail, could influence the trial in the case.
Jaganmohan had moved the court for bail on September 11 on the ground that the four-month deadline set by the Supreme Court for completion of investigation by the CBI had ended on September 9.
The Supreme Court had on October 5, 2012 and on May 9 this year rejected the bail petitions of Jaganmohan, who has been lodged in the Chanchalguda Central Prison here since his arrest on May 27, 2012.