The pair had been sentenced in a retrial in August to three years in prison for reporting so-called false news in support of the Muslim Brotherhood movement, which the army removed from power in 2013 and outlawed.
Pardons are not unusual in Egypt ahead of the Eid al-Adha festival, and these also come a day before President al-Sisi is due in New York for the 70th session of the United Nations General Assembly.
It's unclear yet whether the pardons also apply to Australian journalist Peter Greste, who was freed but re-tried in absentia.
There was jubilation as Australian journalist Peter Greste received the news at least one of his Al Jazeera collegues had been pardoned.
He was clearly overwhelmed as he received the news while on the set of the satirical ABC television show, Media Circus.
"If he's got a pardon, it means.. God I hope it means that Baher (Mohamed) is out too. Because, it's hard to imagine... sorry, I'm feeling really emotional. I mean, we've been fighting for the past 8 months for this and I mean, ... I'm sorry."
There were plans for celebration too, in Egypt, as Mohamed Fahmy walked free.
"We're going to travel the world, we're going to celebrate, we're going to party, and we just really hope that this is, our families have suffered so much since the beginning of this trial, and we're very happy that President Sisi took this action and released us. I will continue fighting for press freedom. "
He was released within hours of the verdict being announced, along with his collegue Baher Mohamed.
Mr Mohamed says the verdict was a huge relief.
"This whole nightmare is over, the whole nightmare is over, we can live like normal people, and go back home, and enjoy my life and that's it. That's it. That's all."
The pardon came 633 days since the three journalists were first arrested in December 2013.
They were initially found guilty in June 2014, charged with aiding the blacklisted Muslim Brotherhood, and spreading "false news".
They denied the allegation and said they were simply reporting the news.
Mr Greste was released in February and repatriated to Australia but his court case continued in absentia.
Mr Fahmy says they should never have been imprisoned.
"It's basically like a war of ideologies, it's about objectivity in journalism, it's about issues that should not be handled in a criminal court. These should not be issues that should be handled in a criminal court - issues related to licences and press passes, again, we've said it many times, this is the responsibility of the network, and the journalists should not be whatsoever included in such an issue."
Human rights groups Amnesty International has welcomed the pardons but called for the release of others still held in prison in Egypt.
Thousands of people arrested during a political crackdown, which began in 2013, remain in prison.
