State media in Myanmar said the prisoners released came from the country's four main opposition groups: student leaders who inspired the 1988 uprising, monks who led a 2007 rebellion, army and intelligence officials purged in 2004, and members of restive ethnic communities.
This is "a glorious day for Burma. Freedom is reborn now," said Htein Lin, an artist and former political prisoner who lives in London.
Human rights groups were more cautious. Amnesty International warned that restoration of ties could weaken the pressure to end human rights abuses in Myanmar.
Another advocacy group, the U.S. Campaign for Burma, also was wary. "We still want to wait and see what else would happen to those who are still in jail," said a spokeswoman, Myra Dahgaypaw.
It could take several days to get an exact count of the political prisoners released, especially since the lists held by activist groups differ. Most said the number appears to be over 300.
Murray Hiebert, an Asia specialist at the Center for Strategic and International Studies think tank in Washington, called the cease-fire with the Karen rebels "surprising and significant," but he added that cease-fires can easily break down.
Both sides acknowledged the agreement but provided few details. The Myanmar government says it is also negotiating with several other ethnic groups. The Karen were the only major ethnic group never to have reached a peace agreement, even temporary, with the government.
"I'd say this is one of the historic, great moments," said Alana Golmei, a coordinator with India's Burma Center Delhi activist group. "Guns are no solution, although there's always a risk they could pick up guns again."
"To say they've solved all the problems would be a mistake," said Bridget Welsh, a political scientist at Singapore Management University. "But from where they've come in a year, it's quite a ways."
Times staff writers Richter reported from Washington and Magnier from New Delhi. Special correspondent Roughneen reported from Bangkok.