Bernard Planche, 52, was freed Saturday near a checkpoint set up by US and Iraqi security forces to the west of the Iraqi capital, an Iraqi security source said.
"The kidnappers were in a car with the hostage, they fled when they saw the soldiers," the source added.
Mr Planche was kidnapped by an Iraqi rebel group on December 5 from his home in an upmarket Baghdad neighbourhood.
The group, calling itself the Battalion of the Lookout for Iraq, had threatened to kill him if France did not "end its illegitimate presence in Iraq" in a video broadcast by Al-Arabiya television.
In his statement confirming Mr Planche's release, Mr de Villepin repeated government warnings of "the extremely dangerous nature of any stay in Iraq" and again urged French nationals not to go there.