The police said Hussain's move back from hospital to detention was agreed after consultation with the Wellington Hospital, where he had been receiving treatment. Investigations are on in the case and Hussain is due to report to police again in July.
Thousands of his supporters had been staging a protest rally in Karachi - Pakistan's biggest city and the MQM's power base. The news of Hussain's release prompted wild celebrations in the city, media reports said.
Hussain has lived in the UK since the early 1990s, saying his life would be at risk if he returned to Pakistan. He has since become a British citizen.
According to some media reports, Scotland Yard had begun a money laundering probe against Hussain after they recovered some funds from his home with an unclear source. Officers had searched the premises in Edgware area of north London.
Hussain has been under investigation for money laundering worth at least 400,000 pounds, for inciting violence and in connection with MQM leader Dr Imran Farooq's murder.
His London residence was raided on money-laundering suspicion in 2012 and 2013 by British police.
The MQM, formed in 1984, largely represents descendants of Urdu-speaking migrants from India who settled in Pakistan when it was created in 1947.
