While the Nobel Committee said it was "delighted" to learn that Liu was finally freed, it "strongly regrets that it took serious illness before Chinese authorities were willing to release him from jail".
The global community has been calling for Mr Liu's release for years.
Liu was rearrested and served three years in a labour camp from 1996-1999 for seeking the release of those jailed in the Tiananmen protests and for opposing the official verdict that their actions amounted to a counter-revolutionary rebellion.
It also called the Chinese Communist Party's approach to modernisation "disastrous".
Liu Xia, Liu's wife who has been under effective house arrest since her husband won the Nobel Peace Prize, is suffering from depression but has been allowed to visit him in prison about once a month, a source close to the dissident told Reuters.
The activist has late stage liver cancer and as his condition worsened, his lawyer applied for medical parole.
But a spokesperson for the foreign ministry in Beijing said they were unaware of the details of Liu's case when asked about him at a regular news briefing on Monday.
Liu was released a few days later and is now receiving medical care at a hospital in Shenyang, Liaoning.
Liu was formally arrested on June 23, 2009, on suspicion of "alleged agitation activities aimed at subversion of the government and overthrowing of the socialist system".
Tibetan writer and family friend Tsering Woeser said she had been in tears after reading online reports of Liu's illness.
An infuriated Beijing tried to censor the news and boycott the award, insisting Liu was a common criminal and that the prize was nothing more than a Western plot against China. "It's a complete violation of the principles of the prize and an insult to the peace prize itself for the Nobel committee to award the prize to such a person".
"I'm sorry", he said.
"That he was ever in prison at all says all one needs to know about Chinese leaders' profound hostility toward peaceful expression and the rule of law", said Sophie Richards, China director at Human Rights Watch.