Former Guantanamo Bay detainee Mamdouh Habib is no longer a security risk and has been granted a passport, Australia's spy agency has confirmed.

The Sydney father of four has been granted an Australian passport for the first time since it was cancelled after his 2005 release from the US military prison in Guantanamo Bay, Cuba.

Mr Habib says he now has his dignity back.

"I have received money, I have received a passport, I have received everything, my dignity back," he said, adding he had no further comment to make because of an exclusive media deal with a television channel, believed to be the Ten Network.

The Australian Security Intelligence Organisation (ASIO) yesterday confirmed it had approved the new passport.

"An ASIO non-adverse security assessment was issued to the Department of Foreign Affairs and Trade in respect of Mr Habib's March 2011 passport application," an ASIO spokeswoman said.

"This was not a recanting of its previous assessment but rather a new assessment based on new information, circumstances and factors relevant to the issue of whether Mr Habib currently poses a risk to Australia's security."

It comes after Prime Minister Julia Gillard in January ordered an inquiry into Australia's role in Mr Habib's arrest, amid claims Australia had been complicit in his 2001 CIA rendition to Egypt, where he was detained and tortured.

Ms Gillard's move followed a secret federal payout to Mr Habib, reportedly triggered by witness statements implicating Australian officials in his detention in a Cairo military prison.

Egyptian-born Mr Habib was detained in Pakistan as a suspected terrorist in October 2001, before being held in Egypt, Afghanistan, and then Guantanamo Bay.

In 2006, the then foreign minister, Alexander Downer, refused to issue Mr Habib a new passport, based on an adverse security assessment by ASIO.

Despite having never been charged, Mr Habib was unable to travel because ASIO continued to maintain he was a threat to national security.

Mr Habib has previously said this caused him to miss four overseas funerals of family members, including his mother, father and sister.

The inquiry into Mr Habib's arrest will review thousands of national intelligence agency documents relating to the case, as well as documents from Mr Habib's civil case against the Commonwealth.

It is due to be completed by the end of 2011, although Federal Attorney-General Robert McClelland has said only parts of the findings would be made public.

- AAP