The 33-year-old was detained at Paris' Charles de Gaulle Airport before his flight to Riyadh at 9.30am (7.30pm AEDT), and was travelling under a real passport, French police had told CNN.
French radio station RTL, citing French police and judicial sources, also reported Tuesday that the man was linked to the hit squad that murdered Mr Khashoggi in Istanbul in 2018.
But the Saudi Embassy in France said the detained man had "nothing to do with the case in question" and called for his "immediate release".
Hours later on Wednesday, the wrongfully detained man was released, prosecutors said.
"After thorough checks on the identity of this person, it was established that the v," the general prosecutor of the Paris Appeals Court said.
"At the end of his judicial detention, he was released."
Mr Khashoggi, a Saudi journalist and a Washington Post columnist, was critical of Saudi Arabia and Crown Prince Mohammed bin Salman's policies.
He was killed and allegedly dismembered on October 2, 2018, in the Saudi consulate in Istanbul, by men with close ties to the highest levels of the Saudi government and bin Salman.
Earlier on Tuesday, French media reports had wrongly identified the detained man as Khaled Aedh Al-Otaibi — one of 16 individuals banned from the United States by the State Department in April 2019 for "their roles in the murder of Jamal Khashoggi."