The Boeing 737 was seized on Tuesday while en route from Sudan's war-torn province of Darfur to the capital, Khartoum. The hijackers redirected the plane to the southeast Libyan Sahara oasis of Kufra.
Libya's Civil Aviation Authority said 95 people were initially on board the airliner. Earlier in the day all passengers were released, and several crew members were retained while negotiations continued.
The standoff with the hijackers, who according to the pilot claimed to be linked to a Darfur rebel group, the Sudanese Liberation Movement (SLM), had lasted for almost 24 hours.
The hostages were earlier shown on state Libyan television being escorted away from the plane by troops.
The pilot said the group had demanded to be allowed to fly to France to meet with their leader, Abdel Wahed Mohammed al-Nur. However the rebel leader, who lives in Paris, denied any involvement, saying: "We categorically deny the responsibility of our movement in this hijacking operation."
Sudan has urged the Libyan authorities to extradite the hijackers.