Hedges initially received the sentence from an Abu Dhabi court after, according to prosecutors, he had admitted to spying.
Hedges denies the charges as well as the statement that he had admitted to spying. He said he was in the UAE doing research for his PhD for Durham University.
He said he was in the country looking into its security strategy as part of his studies.
Hedges’ wife, Daniela Tejada, had appealed to the court for clemency.
Foreign Secretary Jeremy Hunt said they were happy with the decision.
Hedges pardon comes as part of a series of orders issued on the country’s National Day anniversary.
“Although we didn’t agree with charges we are grateful to UAE government for resolving issue speedily,” tweeted Hunt.