"Father Giancarlo Bossi has been freed, a car is bringing him to a Philippines police station," Italy's ANSA news agency reported Prodi as saying.
Bossi had managed to get a message to Italy's ambassador to Manila, Anna Fedele Rubens, saying he was fine, an Italian foreign ministry spokesman told AFP.
Pope Benedict XVI welcomed the news with "great joy," said Vatican spokesman Father Federico Lombardi.
Bossi, 57, is a member of the Pontifical Institute for Foreign Missions (PIME). He was seized on June 10 in Zamboanga Sibugay in the southeast Philippines.
Gian Battista Zanchi, a senior PIME official told ANSA that Bossi would be given a medical check once he had arrived at Zamboanga.
Prodi thanked all those who had worked for the liberation, including the foreign ministry crisis team which had remained in constant contact with the Philippines authorities.
Philippines military officers in the region originally blamed the separatist Moro Islamic Liberation Front (MILF) for the abduction.
Last week, Philippines marines searching for Bossi on MILF-held territory on Basilan island were ambushed by the group and 14 of them were killed.
A close adviser to President Gloria Arroyo suggested that Abu Sayyaf, an Islamic extremist group known to have ties with Al-Qaeda, might be responsible.