US Marine Sergeant Lawrence Hutchins has been freed by a military judge while a higher court reviews his case (AP)

A marine sergeant convicted of murder in one of the biggest war crimes cases to emerge from the Iraq war was allowed to walk free by a US military judge, nearly two months after a military appeals court ruled he had an unfair trial.

The surprise decision to release Sergeant Lawrence Hutchins deals another blow to Washington's prosecution of US troops accused of killing unarmed Iraqis.

Attorneys for the government have said Hutchins led a squad of seven troops who killed a 52-year-old man in the Iraqi village of Hamdania in 2006, and then planted a shovel and AK-47 to make it appear he was an insurgent.

"I'm going to be the best marine I can be today," an elated Hutchins said after being released from his cell at Camp Pendleton. "Today is really a surreal experience. I think we had a good judge. It's hard to describe exactly what I'm feeling. I'm happy."

Hutchins had been serving an 11-year sentence. The others in his squad served less than 18 months.

The US Navy-Marine Corps Court of Criminal Appeals in Washington ruled in April that Hutchins was not given a fair trial because his lead defence lawyer left the case shortly before his 2007 trial. The Navy is appealing against the ruling.

Hutchins' defence attorney, Captain Babu Kaza, argued that the married father of a five-year-old girl was not a flight risk or a threat to society. Capt Kaza said he and Hutchins, both Roman Catholics, prayed with a rosary at Monday's hearing before the judge announced his decision.

Hutchins will be allowed to remain free while the US Court of Appeals for the Armed Forces decides whether to affirm or overturn the Washington court's ruling. The court is expected to hear arguments from both sides this autumn and could take until next year to make a decision.

Navy Secretary Ray Mabus told the Marine Corps Times last year that he believes Hutchins was the ringleader in the premeditated murder plot and attempted cover-up, and that he should complete the full sentence. Hutchins was initially sentenced to 14 years but that was later reduced.

Hutchins has said he was not with his squad at the time and that members of his squad told him they had killed an insurgent leader. Hutchins said he did not learn of the mistake until after the investigation.

PA