David Lin, 68, was given a life sentence in 2006 on charges that the US says were bogus, after he was convicted of fraud for helping an underground church launch a meeting centre in Beijing.
His release took place just weeks after US national security adviser Jake Sullivan met China's foreign minister in the Chinese capital.
His daughter, Alice, told Politico: "No words can express the joy we have - we have a lot of time to make up for."
She added the US State Department contacted her on Saturday to confirm Chinese authorities had released her father from prison and that he would be flying into San Antonio, Texas, on Sunday.
"We welcome David Lin's release from prison in the People's Republic of China," a State Department spokesperson said.
"He has returned to the United States and now gets to see his family for the first time in nearly 20 years."
The timing of Jake Sullivan's meeting with foreign minister Wang Yi indicates he may have had a hand in the negotiations that lead to Mr Lin's release.
"I know that Jake Sullivan did raise my dad’s case," his daughter told Politico.
While incarcerated, Mr Lin missed his daughter's wedding and the birth of his grandson.
His release comes days ahead of a congressional hearing focused on US citizens detained in China, of whom there are estimated to be 200.
Two other Americans, Mark Swidan and Kai Li, are considered to be unjustly imprisoned by the State Department. Swidan is currently on death row for alleged drug trafficking.
All are said to be experiencing health issues.
China does not recognise dual nationality, meaning people who hold both an American and Chinese passport are regarded as Chinese citizens by Beijing.