Olson was a member of the Symbionese Liberation Army and a fugitive for 23 years. The radical group was best known for the kidnapping of heiress Patty Hearst.
She was released just after midnight early Tuesday morning from the Central California Women's Facility in Chowchilla.
The Department of Corrections approved Olson's request to serve parole in Minnesota.
"One of the criteria is that the offender must have been a resident of the other state for at least one continuous year and have resident family in the other state that have indicated a willingness and ability to assist in the plan of supervision," said a statement from the Department of Corrections.
Olson has served seven years - half her sentence - after pleading guilty to placing pipe bombs under Los Angeles Police Department patrol cars and participating in a deadly robbery of a suburban Sacramento bank.
The decision to allow Olson to serve her parole in Minnesota has outraged the Los Angeles Police Protective League. Minnesota was the location of her choice.
"We believe that Sara Jane Olson owes a great debt to the people of California and also to the law enforcement here in California," said Paul Weber, president of the L.A. Police Protective League.
"She should serve her entire sentence, including her parole, here in California," he said.
Critics argued Olson should finish her parole where her crimes were committed.
During her time as a fugitive, Olson married a doctor, had three children and was active in her community in Minnesota, but her past caught up with her in 1999 after she appeared on America's Most Wanted.
Olson began serving her sentence in 2002, and was released by mistake last year. She was sent back to serve one more year in prison.
The Associated Press contributed to this story.
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