Perarivalan is serving a life imprisonment sentence in connection to the assassination.
The top court granted relief to Perarivalan taking consideration of his conduct, ill health and the fact that he has spent more than 30 years in prison.
As per the SC order, he would have to follow the conditions of release and report to the local police officer every month.
A bench comprising of Justice L Nageswara Rao and Justice BR Gavai noted that there was no complaint about his conduct when he had been released thrice on parole before.
This is the first time that the convict has been released on bail since he was arrested.
The bench also took into note of the fact that the Governor of Tamil Nadu is yet to decide Perarivalan's plea seeking release from the prison.
Before granting bail, the apex court said that the case highlights a "very important" issue on whether a Governor can "sit on" plea for remission despite the state cabinet's approval.
Perarivalan had approached the top court seeking release from the prison based on the recommendation made by the Tamil Nadu government in September 2018.
Arrested at age of 19 in the case, Perarivalan was sentenced to death in May 1999. He was accused of purchasing the 8-volt battery used to trigger the belt bomb that killed Rajiv Gandhi.
Gandhi was assassinated on May 21, 1991, at Sriperumbudur in Tamil Nadu by a woman suicide bomber, identified as Dhanu, at a poll rally.