A court statement said investigative magistrate Luis Alaez released Francisco Jose Garzon Amo without bail.
The statement said Garzon must appear in court once a week and is forbidden to leave Spain without permission.
Garzon was not sent to jail or required to post bail because none of the parties involved felt there was a risk of him fleeing or attempting to destroy evidence, the statement said.
It said the train driver's license had also been withdrawn.
Garzon was questioned for almost two hours at the court in Santiago de Compostela, the northwestern town near where the accident occurred.
Garzon was driving the train carrying 218 passenger in eight cars that hurtled far over the 80-kph (50-mph) speed limit into a high-risk curve on Wednesday evening, tumbling off the tracks and slamming into a concrete wall, with some of the cars catching fire.
The Spanish rail agency has said the brakes should have been applied four kilometers (2.5 miles) before the train hit the curve.
However, a local resident who rushed to the scene of the accident said in an interview broadcast Sunday that minutes after the crash Garzon had told him he had been going fast and couldn't brake.
The resident, Evaristo Iglesias, said he and another person accompanied the blood-soaked Garzon to flat ground where other injured people were being laid out, waiting for emergency services to arrive.
"He told us that he wanted to die," Iglesias told Antena 3 television. "He said he had needed to brake but couldn't," Iglesias said. He added that Garzon said "he had been going fast."
In its report about the accident, Antena 3 television showed a photograph of Iglesias in a pink shirt and cap helping to carry the driver after the train accident. The station also aired television footage of Iglesias working beside the wrecked train to help other survivors.
In the interview, Iglesias recalled Garzon's words, "'I don't want to see this, I want to die,' that's what he said repeatedly," said Iglesias. "'I had to brake down to 80 and couldn't,'" Iglesias quoted the driver as saying.
Iglesias was among the survivors and witnesses who began to give evidence to police on Sunday.
Investigators must determine if Garzon failed to apply the brakes or whether it was a technical failure.
Spain's state-run train company has described him as an experienced driver who knew the route well.
On Sunday, the death toll from the train derailment rose to 79 when an injured passenger died at University Hospital in Santiago de Compostela, officials said. She was identified as American Myrta Fariza of Houston, her family said in a statement.
Fariza's friends and family had created a Facebook page while she was hospitalized titled "Hope for Myrta," where they collected donations and exchanged messages.
Officials said 70 people injured in the train accident remained hospitalized, 22 of them in critical condition.
Meanwhile, authorities said forensic experts have identified the last three bodies among the 79 dead.
Victims have been reported from Algeria, Brazil, the Dominican Republic, France, Italy, Mexico and the United States, but officials have not publicly identified each victim or his or her nationality.
Mourning continued throughout Spain, with Sunday church services being held in remembrance of the dead. A large funeral mass is planned for Monday afternoon in Santiago de Compostela, and the prime minister and members of the royal family are expected to attend.
The crash has cast a pall over the town, a Catholic pilgrimage site. Santiago officials had been preparing for the religious feast of St. James of Compostela, Spain's patron saint, the day after the crash but canceled it and turned a local sporting arena into a morgue.