Pyongyang says it will return seven South Korean fishermen who admitted entering North Korean waters.
The squid fishing boat was seized last month at a time of rising tension on the Korean peninsula.
North Korea's official news agency says it made a "compatriotic and humanitarian" decision to send the boat and the seven men aboard it home.
The dispatch calls the boat's alleged incursion into the North's exclusive economic zone "an intolerable infringement upon the sovereignty" of the country. It says the crew - four South Koreans and three Chinese - admitted to the violation and pledged to never repeat it.
A senior research fellow at the Korea Institute for National Unification in Seoul, Choi Choon-Heum, calls the release surprising. He says Pyongyang apparently wants to improve relations with Seoul.
Choi terms North Korea's timing for the action clever and meant to ease tension so South Korea will more readily consider giving aid, including rice, to the impoverished communist country.
North Korea, according to aid agencies, faces a worsening food shortage. The country has relied on aid to feed its people since a famine in the 1990s killed thousands of people.
The release of the crew of the fishing boat also comes as North Korea prepares to convene a rare gathering of its Workers Party. North Korea experts speculate that leader Kim Jong Il called the meeting as a step toward passing power to his third son, Kim Jong Un.
The elder Kim last week made a surprise visit to China, his country's only powerful ally.
Tensions have been high on the peninsula since the sinking in late March of a South Korean naval vessel. An international investigation concluded the Cheonan was hit by a North Korean torpedo. Pyongyang denies responsibility.
South Korea and the United States responded with a series of joint war games they say are meant to deter the North from further provocative acts.
The latest such exercise, in the Yellow Sea, was to begin Sunday. It was postponed because of an approaching tropical storm.