The court approved bail on condition Pervez Musharraf pay bonds totaling $2,000.
But the former general remains on a government exit control list and cannot leave the country.
Speaking outside the court in the capital, his lawyer said Pervez Musharraf had no intention of leaving Pakistan.
The operation ordered by General Pervez Musharraf on the besieged Red Mosque left a cleric and more than 100 others dead, and fuelled a deadly militant insurgency inside Pakistan which rages to this day.
Earlier this year, he returned to Pakistan from self-imposed exile to fight elections – which were won by Nawaz Sharif, the man he ousted in his 1999 coup – but swiftly ran into trouble.
Pervez Musharraf was barred from running in the general election, and was placed under house arrest in April in the first of a series of cases relating to his time in power from 1999-2008.
He faces murder trials over the assassination of former PM Benazir Bhutto and Baloch tribal leader Nawab Akbar Bugti. He has also been charged over his attempt to sack the higher judiciary in 2007.
Pervez Musharraf has been bailed in all three of those cases.
Separately, the Sharif government said in June that it planned to try him for treason – but a formal complaint in that case has still to be lodged.
Pervez Musharraf insists all the charges against him are politically motivated.
His house arrest is unprecedented in a country which has been ruled by the military for more than half of its history.
The latest bail ruling means Pervez Musharraf could soon be free to move around Pakistan.
However, Pervez Musharraf is likely to remain under guard at his villa on the outskirts of Islamabad because of threats to his life.
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