Suu Kyi was reported to be tearful and to have difficulty making herself heard over the shouts of her enthusiastic supporters.
A doctor checked her state of health before she greeted the crowds, according to her lawyer Khi Win.
“Everybody is very happy,” he told RFI. “She is a politician and will continue to be involved in politics.”
French President Nicolas Sarkozy warned Myanmar against "any restrictions on [her] freedom of movement and expression" after the release was reported.
US President Barack Obama welcomed the release, calling Suu Kyi "a hero of mine" and saying it was time for the Myanmar junta to free all political prisoners.
The secretary-general of the Asean group of south-east Asian nations, Suring Pitsuwan, said he was "very, very relieved".
It is not yet clear if the government has placed conditions on the lifting of house arrest.
Speaking before the release, former political prisoner Win Tin told RFI that Suu Kyi would not sell out for the sake of freedom.
"The military government used to ask political prisoners to sign some sort of pledge to renounce their politics," he said. "But most of the politicians who had been in jail in the time of this government, for about 20 years, very, very few people, only very few people, signed such a thing.
"But most of them never, never do it, and Aung San Suu Kyi will never do it."
A previous period of freedom ended when Suu Kyi broke its terms by going outside the capital.
The opposition claims that about 2,000 political prisoners remain in detention.