Dominique Strauss-Kahn was freed from house arrest on Friday after prosecutors said the maid accusing him of sexual assault lied to a grand jury, though the ex-IMF chief still faces charges.

The sensational twist raised French opposition hopes that the sexual assault case will collapse and the Socialist party favorite will return to frontline politics, possibly even as a candidate to fight Nicolas Sarkozy for the presidency in 2012.

A smiling Strauss-Kahn, 62, appeared as if a large weight had been lifted off his shoulders as he left the frenzied atmosphere of the packed Manhattan courtroom, his arm affectionately draped on wife Anne Sinclair's shoulder.

He soon took advantage of his newfound freedom, dining with his wife and another couple at an upscale restaurant on Manhattan's posh Upper East Side in the evening.

It was a complete turnaround for a man who spent days locked up in New York's tough Rikers Island jail complex in May.

Earlier, an unidentified individual got inflatable balloons, including one representing the Statue of Liberty, delivered to Strauss-Kahn's home to celebrate his ‘freedom.’

Strauss-Kahn, whose $1 million bail and $5 million bond will now be returned, is free to travel anywhere in the United States, though authorities will keep his passport, pending possible trial.

The restrictive bail conditions, including wearing an ankle monitor, limited outings and being confined to a Lower Manhattan townhouse under the watch of armed guards were lifted.

According to the alleged victim's initial testimony to the grand jury, she fled Strauss-Kahn's luxury Manhattan hotel suite immediately after the May 14 attack and waited in the hallway before informing a supervisor.

But, prosecutors revealed, the 32-year-old Guinean maid subsequently changed her story to say she actually cleaned another room and even returned to start cleaning Strauss-Kahn's suite before alerting her bosses.

Strauss-Kahn's attorneys William Taylor and Benjamin Brafman said the disclosures "only further confirm that he will be fully exonerated."

Among other discoveries about the maid, law enforcement official told The New York Times, were issues involving her asylum application and her possible links to criminal activities, including drug dealing and money laundering.

Within a day of the alleged rape attempt, the maid was recorded speaking on the phone with a man jailed for possessing 400 pounds (180 kilograms) of marijuana and discussing the benefits of pursuing charges, according to the newspaper.

The Times said that man was one of several individuals had who made multiple cash deposits, totaling around $100,000, into the woman's bank account over the last two years.

Despite shattering the credibility of the maid, District Attorney Cyrus Vance vowed prosecutors would continue their investigations until they had uncovered all the facts.

"Today's proceedings did not dismiss the indictment or any of the charges against the defendant," he stressed.

Judge Michael Obus concurred, telling the court: "The case is not over, as we've heard. In the meantime, there will be no rush to judgment on the case. We expect the process will go on."

Strauss-Kahn, who resigned from his high-profile post at the world's crisis lender on May 18 to fight the charges, was ordered to return to court for his next scheduled hearing, on July 18.

Outside the courtroom, the maid's lawyer admitted his client had made ‘some mistakes,’ but insisted the forensic evidence would prove Strauss-Kahn was guilty of a brutal sexual assault.

Ken Thompson, went on to relay in the most graphic detail yet the accusations against Strauss-Kahn.

"Dominique Strauss-Kahn came out running out of one of those rooms naked, toward her, and he grabbed her breasts first and started to attack her. He grabbed her vagina with so much force that he bruised her vagina," Thompson said.

The attack was so violent, according to the lawyer, that Strauss-Kahn ripped the maid's stockings and tore a ligament in her shoulder.

"That is a medical fact. She now may need surgery for the damage he caused to her shoulder," he added.

"After he finished, she got up and started to run for that door and started spitting Dominique Strauss-Kahn's semen out of her mouth in disgust all over that hotel room."

Despite his defiance, Thompson admitted fearing the district attorney's office was "laying the foundation to dismiss this case."

"We believe that he's afraid that he's going to lose this high-profile case," he added.

Doubts over the maid's credibility marked a stunning reversal in a case that upended politics in France and prompted a change in leadership at the International Monetary Fund at a time of major upheaval in the eurozone.

Word that the case might implode raised hopes among France's opposition Socialists that a vindicated Strauss-Kahn might return to help them drive Sarkozy from office in next year's elections.

"It's a thunderbolt, but in the opposite direction this time," said Socialist former Prime Minister Lionel Jospin.