Here the key points arising from today's hearing:

• New York prosecutors are continuing their investigation in the sexual assault and attempted rape case against Dominique Strauss-Kahn, and will re-examine evidence.

• The former head of the IMF was released from house arrest and his bail money was returned.

• He must return to court on 18 July.

• The New York district attorney is says that the alleged victim has admitted lying in one element of her account of what happened after the alleged incident. The DA's office also detailed other lies not related to the case that she had alleged told in her asylum application, tax details, and other smaller matters.

• The alleged victim's lawyer restated her case against Dominque Strauss-Kahn in graphic terms and said she would soon waive her right to anonymity.

Paul Harris sends this report on the press conference Cyrus Vance, the New York district attorney, just gave, after which he refused to take questions. Vance said his office would continue to investigate the case and that no charges had been dropped.

He said the overriding concern of his office - as it was with all cases - was to go where the facts took his investigators, no matter where that was. "Our commitment is to the truth and the facts," he said. He also said he believed his office had treated the alleged victim with great respect. "We believe we have done nothing but to support her," he said.

Reuters is pointing out that the alleged victim's change in her account of what happened after the alleged sexual assault means the district attorney is saying she lied to the grand jury.

Here is the letter from the New York district attorney to the defence in the Strauss-Kahn case (thanks to Dominic Rushe).

It details false statements the alleged victim made during her asylum application after fleeing Guinea in 2004. She also admitted tax fraud, and lied about "a variety of additional topics concerning her history, background, present circumstances and personal relationships".

The only lies directly concerning the case are that she originally said that after the alleged incident "she fled to an area of the main hallway of the hotel's 28th floor an waited there until she observed the defendant leave suite 2806 and the 28th floor by entering an elevator. Now she says that after the alleged incident she "proceeded to clean a nearby room and then returned to suite 2806 and began to clean that suite before she reported the incident to her supervisor".

To recap, Kenneth Thompson, the alleged victim's lawyer, has said that she is going to waive her anonymity and put her side of the story in public.

Thompson had a number of purposes in making his lengthy statement, which CNN strangely characterised as "an extraordinary outburst". It certainly was not an outburst, but was delivered in firm, passionate manner.

He wanted to make these key points:

• The alleged victim may have made some mistakes, but that doesn't mean she's not a rape victim. The lies she is accused of telling do not undermine her case against Strauss-Kahn.

• The New York district attorney, Cyrus Vance, is afraid to try the case because he thinks he will lose – hence, he says, the leaks to destroy the alleged victim's credibility.

• As a corrective to a view gradually becoming received wisdom that Strauss-Kahn is innocent, he wanted to describe the alleged crime in graphic detail in order to emphasise that Strauss-Kahn is accused of a very serious crime and bring sympathy back to the alleged victim's side.

Before that he also talked about the alleged victim having suffered female genital mutilation.

It happened to her in Africa against her wishes. She was very concerned that her young daughter would also have to endure female genital mutilation. She was desperate to prevent that from happening to her baby girl and so she came to America. She came to America because of the great promise of this country.

Her asylum application was not completely accurate, he says.

She was raped in Africa by soldiers, he says. She was afraid to tell the prosecutors that the rape did not occur in connection with the asylum application, he says, but she was raped in Africa.

All the statements regarding drugs leaked by the DA's office are a lie, Thompson says.

Our concern is that Manhattan DA Cy Vance is too afraid to try this case, he says - as he lost a recent police officer rape case.

But he has an obligation to stand up for this rape victim, he says.

The DA is letting DSK walk the streets of New York despite all this evidence, Thompson says.

It is a fact that the victim here made some mistakes, but that doesn't mean she is not a rape victim, he says. All the things they leaked to the New York Times were designed to discredit them.

She is determined not to remain "in hiding" and would come before the press to tell everyone what DSK did to her and how the DA's office treated her.

The alleged victim's lawyer Kenneth Thompson is speaking now. He puts in a strong, impassioned performance.

The victim from day one has described a violent sexual assault that Dominique Strauss-Kahn committed against her. She has described that many times to the prosecutors and to me and she has never once changed a single thing about that account. The DA knows that. That was true the day it happened; it is true today. The victim herself is the one who came forward voluntarily with the information about her asylum application. She told me she wanted to tell the DA the truth about how she came to this country. I told the DA's office exactly what the victim told me and the victim then met with the DA alone and described some of the tings that she had not told them. The only defence Strauss-Kahn has was this sexual encounter was consensual. That was a lie.

He runs through the points that he said proved this:

When the victim walked into that suite she did so for one reason and that was to clean that suite. She was told no one was inside that room. She went into that room believing [that] and then Strauss-Kahn came running out of one of those rooms naked towards her and he grabbed her breasts first and started to attack her. He then grabbed her vagina with so much force that he hurt her ... that he bruised her vagina. When she went to the hospital later that day the nurses saw the bruises that were caused by Dominique Strauss-Kahn's hands and the DA has those pictures ... When Dominique Strauss-Kahn threw the victim to the floor he tore a ligament in her shoulder. She may now need surgery for the damage he caused to her shoulder ... He also ripped her stockings and the DA knows that. When she was fighting to get away, when she was on her knees and he was sexually assaulting her, after he'd finished she got up and ran for thew door and started spitting Dominique Strauss-Kahn's semen out all over that hotel room. She spit it on the wall and the floor.

The hotel staff and police saw that she had done that, he says.

The medical and forensic evidence supports her account, he says. She was taken to the hospital in an ambulance. A grand jury has already found her account credible.

Strauss-Kahn's defence attorney Benjamin Brafman has just been speaking outside the court. He said:

On the eve of independence day we get to celebrate for Mr Strauss Kahn and his family a bit of personal independence.

He says he will consult with DSK now. He does not have to remain in New York but cannot leave the country. He says: "The next step will be a complete dismissal," suggesting he is going to try to get the charges thrown out.

Judge Michael Obus has ended Strauss-Kahn's house arrest, the Associated Press confirms.

Dominic Rushe writes that Strauss-Kahn has been freed but must return to court on 18 July.

Reuters is reporting that the government is retaining Strauss-Kahn's travel documents, but his cash bond has been returned.

Reuters is also reporting that Strauss-Kahn has been released on his own recognizance. This means no bail, although he seems to have been required to surrender his passport.

Strauss-Kahn is no longer required to pay for his house arrest or wear an electronic tag but cannot leave the country and return to France, CNN reports.

The prosecution says new evidence has caused it to reassess the case. "The case has been affected but we are not dismissing the case," CNN reports the prosecution as saying.

Strauss-Kahn is now leaving court with his wife.

CNN is reporting that the judge has ruled that Strauss-Kahn is "free on his own recognizance" (see 3.17pm) but they have kept his travel documents. It is unclear which charges are still pending against him, CNN says.

Paul Harris has just been speaking to Professor John Coffee of Columbia Law School in New York. He says today's developments show that the New York prosecutors have done their job well by finding out information about their witness and coming forward with it even though it harms their initial case.

This is the mark of a professional prosecution team. There are many places where prosecutors might have tried to hide this information. This is a vindication of the system.

AFP, the French news agency, is reporting that the court has lifted bail on Strauss-Kahn.

BBC News is reporting that the prosecution have lifted some elements of bail.

French voters give their response to reports that the prosecution case against Dominque Strauss-Kahn in this video. One woman says:

I'm happy to see that not everything was black and white. There was a little bit of grey in there.

_

Reuters says political analysts feel Dominique Strauss-Kahn's reputation has been too tarnished for him to be a presidential contender, even if he is cleared.

"The damage to his reputation ... makes the idea he could be a candidate very hypothetical; it's science fiction," said Christophe Barbier, editor of L'Express.

On CNN Jack Lang, the former French culture minister, has just been saying he thinks if this case is thrown out Strauss-Kahn will return to France more popular than before. But asked if he would then have a chance of becoming the Socialists' presidential candidate, Lang said that would require a party rule change with the primary process already under way.

Dominic Rushe writes from court:

Prosecution team just walked in - looking very glum. Assistant DA Artie McConnell in particular looks crushed.

BBC News is claiming Strauss-Kahn's "confident" demeanour as he walked into court showed that perhaps "he knows something we don't". We'll find out soon.

"A person familiar with the investigation" is the source for the Associated Press news agency's claim that the Manhattan district attorney's office will agree to release Dominique Strauss-Kahn without bail.

The person was not authorised to speak publicly and talked to the Associated Press on condition of anonymity. Releasing him without bail signals that the accusations of sexual assault may be less serious than thought. A judge must sign off before Strauss-Kahn can be released. The move comes after a person familiar with the case told the AP that prosecutors raised serious questions about the credibility of the hotel housekeeper accusing Strauss-Kahn.

My colleague Dominic Rushe is in court now. He says the court is packed, although the crowd is smaller than last time, and there are no maids outside protesting. "It's bank holiday weekend [independence day, 4 July, is on Monday] so everyone wants out of her asap.

James Cox, law professor at Duke University, told Dominic: "This has got to be the prosecution's worse nightmare. You do what you think is right and then your witness goes south on you."

He said the prosecution was right to act decisively and quickly on the case when the charges were brought and could not be blamed for the media furore that followed. "You can not have a chambermaid bringing allegations against an aristocrat like Strauss-Kahn without there being this find of frenzy," he said.

But, said Cox, given subsequent developments he said he was surprised that the prosecution had not done more homework on their witness ahead of making such strong statements about the case and the strength of their witness.

The Associated Press news agency is now reporting that the New York district attorney will release Strauss-Kahn without bail, citing an "AP source".

The Wall Street Journal is reporting that prosecutors have agreed to modify Dominique Strauss-Kahn's bail and end his house arrest.

Strauss-Kahn is arriving at court now.

Strauss-Kahn is on his way to court. CNN has just been showing pictures of him and his wife leaving their residence to head to court.

Dominic Rushe writes that the local New York media is being let into the court first, much to the annoyance of the international media.

In a clear-headed piece at the Atlantic, Andrew Cohen draws out what he reckons is the key point from the New York Times's article.

It will be virtually impossible to neutralise this (from the Times's piece): "According to the two officials, the woman had a phone conversation with an incarcerated man within a day of her encounter with Mr. Strauss-Kahn in which she discussed the possible benefits of pursuing the charges against him. The conversation was recorded." If this is true, it establishes a motive for the woman to (falsely) accuse Kahn of rape after a consensual sexual encounter. It is enough, alone, to establish reasonable doubt? Prosecutors seem to think so and they are probably right.

This accusation comes from the New York Times piece and cannot be corroborated by the Guardian.

Paul Harris in New York adds that CNN is reporting that Strauss-Kahn's criminal charges might be reduced to a misdemeanour. "That means DSK will have his bail reduced greatly or even removed altogether and he will be free to travel throughout the US. Eventually, defence sources tell the channel, the defence will push to have all the charges dropped."

My colleague Dominic Rushe writes from New York. He says there are around 200 journalists lining up at the court to get in and jockeying for position: French, German, British, American. Dominic writes: "Sympathy seems to be with the maid still in the line. She may have lied about her past but the question remains: was she assaulted?"

Just to translate "on his own recognizance" (see 3.06pm), it is a term used when the defendant is released but promises to attend all court proceedings and not to engage in any illegal activity or prohibited conduct. A financial bond is often set, but not demanded unless the court orders it forfeited.

Reuters has interviewed the brother of the woman who has accused Dominique Strauss-Kahn of sexual assault and attempted rape. He said she was the victim of a smear campaign. Mamoudou, whose surname is being withheld to protect his sister's identity, said from Guinea: "These are lies that have been invented to discredit my sister."

Bloomberg news is already tweeting that prosecutors have agreed to release Strauss-Kahn prosecutors "on his own recognizance". The court hearing will begin in around an hour and a half.

In court in May, bail was set for Dominique Strauss-Kahn at $1m (£624,000) in cash with a $5m insurance bond. He was required to surrender all his travel documents and remain under house arrest in Manhattan under 24-hour armed guard.

Stringent conditions included an electronic bracelet that sent a signal to a security company and a police station the moment Strauss-Kahn left the property, and video cameras to monitor him inside the property. The conditions are costing Mr. Strauss-Kahn $250,000 a month.

The New York Times says that under the relaxed conditions of bail to be requested today, the district attorney's office would retain Strauss-Kahn's passport but he would be permitted to travel within the United States.

Dominique Strauss-Kahn will appear at the Manhattan criminal court, in downtown Manhattan, this afternoon for a hearing at which Justice Michael Obus is expected to consider easing the former IMF chief's bail conditions. The hearing comes as reports claim the sexual assault case against the man once considered a leading Socialist candidate for the French presidency is on the verge of collapse.

As my colleagues Ed Pilkington, Dominic Rushe and Angelique Chrisafis report, there were claims in the New York Times last night that significant problems had emerged in the case against Strauss-Kahn. These could see the conditions of his house arrest in New York being relaxed with immediate effect.

The paper claims "major holes" in the case will be admitted in court as early as today.

The claims have thrown French politics into disarray, the second time this case has done so. Strauss-Kahn, a Socialist, was seen as the leading candidate to beat Nicolas Sarkozy in next year's presidential elections until the allegations against him dramatically emerged in May. Strauss-Kahn is accused of sexually assaulting and attempting to rape a maid at the Sofitel hotel in Manhattan on 14 May.

France's former Socialist prime minister Lionel Jospin described the latest developments as a "thunderbolt" as allies speculated Strauss-Kahn may now be able to run after all. His job at the IMF has been taken by former French finance minister Christine Lagarde.

This week, the Socialist party launched its primary race for a candidate on the basis that Strauss-Kahn's political career was over. But the dramatic developments in New York have prompted some members to call on the party to suspend the process.

Citing "two well-placed law enforcement officials", the New York Times claims Strauss-Kahn's "accuser has repeatedly lied".

Although forensic tests found unambiguous evidence of a sexual encounter between Mr Strauss-Kahn, a French politician, and the woman, prosecutors now do not believe much of what the accuser has told them about the circumstances or about herself … Senior prosecutors met with lawyers for Mr Strauss-Kahn on Thursday and provided details about their findings, and the parties are discussing whether to dismiss the felony charges.

In addition to the New York Times claims, the Associated Press has reported that prosecutors have raised questions about the woman's credibility and background.

But Kenneth Thompson, a lawyer for the woman (who is not being named), told the NYT: "Nothing changes one very important fact, namely, that Dominique Strauss-Kahn violently sexually assaulted the victim inside of that hotel room at the Sofitel."

Here's a timeline of the case so far, courtesy of my colleague Richard Nelsson:

13 May: Dominque Strauss-Kahn, head of the IMF, checks into $3,000 a night suite, room 2806, at the luxury Sofitel hotel in midtown Manhattan.

14 May: At around midday, a 32-year-old maid enters the suite, which she thought unoccupied, and an attack by the Frenchman is alleged to have occurred after she opened the bedroom door and found him naked. She reports what happened to her supervisor who calls the police.

14 May: At around 4.40pm Strauss-Kahn is pulled off a Paris-bound flight minutes before take-off from New York's JFK airport and arrested. He is accused of a sexual assault on a maid in his suite. He asks "What is this about?" and 15 minutes later, says "I have diplomatic immunity".

15 May: The 62-year-old economist is charged with "criminal sexual act, unlawful imprisonment, attempted rape" of the so far unidentified woman employee of the hotel.

16 May: He enters Manhattan Criminal Court for a hearing. A New York judge accepts the prosecution argument that Strauss-Kahn is a flight risk and orders him detained without bail in New York's Rikers Island jail.

17 May: Strauss-Kahn is reportedly under suicide watch on Rikers Island. US treasury secretary Timothy Geithner says the Frenchman is "obviously not in the position to run the IMF".

18 May: The victim, an immigrant from the west African nation of Guinea, testifies behind closed doors at a grand jury hearing. Denies she had consensual relations with Strauss-Kahn. The New York police conduct forensic search of hotel suite.

18 May: Strauss-Kahn resigns as managing director of the IMF and denies all the allegations.

19 May: He is formally indicted by the grand jury and the seven charges against him are confirmed. Faces a potential maximum of 74 years prison if convicted. Bail is granted after he agrees to post $1m cash and $5m bond and submit to round-the-clock surveillance under house arrest

20 May: Released from Rikers and moves into an apartment near Wall Street, before moving on to a townhouse rented for a reported $50,000 a month.

23 May: Newspaper reports suggest that traces of Strauss-Kahn's semen have been found on the maid's shirt.

27 May: French president Nicolas Sarkozy calls it a "sad" affair.

6 June: At a brief hearing at Manhattan criminal court, the former head of the IMF pleads not guilty to allegations of attempted rape and the sexual assault of a hotel maid. His lawyers say they need six weeks to assess evidence collected by the US authorities. Hundreds of hotel workers gather outside the courthouse roaring their disapproval at Strauss-kahn by shouting "shame on you".

28 June: Christine Lagarde selected to serve as IMF managing director.