Khan's decision to release the pilot came after several countries offered diplomatic assistance to mediate between the two countries, which have gone to war three times since their independence from British colonial rule in 1947.
Authorities on both sides were tight-lipped on the reasons for the delay.
Indian air force planes entered Pakistani airspace on Wednesday after Pakistan carried out six airstrikes in Indian-occupied Kashmir, said Major General Asif Ghafoor, a spokesman for the Pakistan armed forces.
Wing Commander Abhinandan's plane was shot down over a Pakistani-controlled area of the Kashmir region following a mid-air skirmish earlier this week. In the Express Tribune, lawyer Shahzaib Khan wrote that Pakistanis "have a reason to boast ... the Prime Minister (Imran Khan) has done Pakistan proud by not engaging in chest thumping or war-mongering for political gain".
Wing Commander Abhinandan Varthamancrossed the border back into India on Friday night in a high-profile handover that was broadcast live on television. Hostilities between the two nuclear powers have further escalated after the Pulwama attack in India-controlled Kashmir on 14 February.
India has repeatedly told Pakistan to act against terror groups operating from its soil and recently handed over dossier containing "specific details" of the involvement of the JeM in the Pulwama terror attack and the presence of camps of the UN-proscribed terror outfit in Pakistan.
Earlier, U.S. President Trump said he expected "reasonably decent news" regarding the conflict between India and Pakistan, adding that the U.S. was trying to mediate.
An army statement said Indian troops undertook to fire along the LoC in Hotspring, Tatta Pani and Jandrot Sectors where India also "deliberately targeted civil population". The airstrikes led to the closure of dozens of airports in the subcontinent.
Pakistan prepared to hand over a captured Indian pilot on Friday while blistering cross-border attacks across the disputed Himalayan region of Kashmir continued for a fourth straight day, even as the two nuclear-armed neighbours seek to defuse their most serious confrontation in two decades.
Abhinandan was captured by the Pakistan Army after his fighter jet crashed in an air duel with a Pakistani F-16.
Abhinandan was flying one of these aircraft and he was arrested by ground forces in Azad Jammu and Kashmir.
India scrambled its planes to target PAF jets and as they crossed over into AJK, a fearless Pakistani pilot shot down two of the enemy planes.
Islamabad said the pilot's release was a "gesture of peace".
With Abhinandan back home, people from both countries are hoping that tension between the countries will reduce gradually while a lot of personalities from India like cricketers, movie stars and business tycoons praised him and welcomed him back. He said the latest tensions between Pakistan and India rose so suddenly that some people sold their sheep, cows and buffaloes at throwaway prices in his native Chikothi town. Pakistan denies the charge, saying it provides moral and diplomatic support to Kashmiris fighting for right to self-determination. Almost 70,000 people have been killed in the uprising and the ensuing Indian military crackdown.