|Former Australian hostage Douglas Wood escorted by US military after he was freed in Baghdad|
Iraqi military officials say soldiers stumbled onto hostage Douglas Wood when they searched a house for weapons.
General Nasir Abadi said three insurgents were arrested in the house, after they tried to hide Mr. Wood.
"He was under a blanket and he was tied down, and they claimed that he's their father and he's sick," said General Abadi. "But when they uncovered him, they found him."
The general said no one was hurt during the operation.
A 63-year-old Australian is an engineer based in California, Mr. Wood has been missing since April.
Nick Warner, an Australian diplomat assigned to the case, told a news conference the hostage-takers had sent three videos that provided officials with proof that Mr. Wood was alive. The last was received two weeks ago, and made it clear that the captors' demands for Mr. Woods freedom had changed.
"That video came with a demand for payment of a very, very large ransom," he said. "If you remembered back to the first two videos, the first video called for the withdrawal of Australian, British and American forces from Iraq, and if I'm remembering correctly the second video called for the withdrawal of Australian forces."
Mr. Warner said no ransom was paid for Mr. Wood and Australia made no political concessions.
The Australian envoy read a message from Mr. Wood in which he thanked and praised Iraqi forces for the rescue, which he called a positive sign for the future of the nation.