Prosecutor Jose Planas ordered the couple jailed after their civil wedding Friday, when the priest scheduled to perform the religious ceremony the following day said he received a call saying the groom, Jesus Alejandro Martinez, was actually a woman.
Same-sex marriages are illegal in Paraguay, and news of the arrest became the talk of the nation.
Planas had threatened Martinez with five years in prison for falsification of documents, and said he could charge the bride, Blanca Estigarribia, with complicity.
But the couple was released Monday. A doctor who inspected Martinez in jail ruled that he is a hermaphrodite, with atrophied female genitals and well-developed male genitals, according to the couple's lawyer, Jorge Cantero.
"Conclusion: He is a man," Cantero said.
He also said the document in the name of Jesus Alejandro Martinez is legitimate, meaning the forgery charges wouldn't have held up.
"So this case goes into the archives," he said. "It will remain as an anecdote for the media and a bad experience for my clients."
Martinez, who has some feminine traits, said he suspected an ex-girlfriend made the accusation to the priest.
"I always felt like a man, with no feminine inclination," he said.
Martinez said the couple would continue to live along the border near the Argentine city of Clorinda "where everybody knows us and loves us."