“The Tramontana trawler with its entire crew has just left the port of Misrata to return to Italy,” the office of Prime Minister Giuseppe Conte said in a statement.
Talks with the embassy and Libyan authorities “made it possible to quickly reach a positive conclusion for a matter that seriously threatened to get complicated.”
The UN-recognised Government of National Accord (GNA) said on Tuesday that the Libyan coastguard had seized the boat and its crew of five Italians and two Tunisians in Libyan waters in the Gulf of Sirte and taken them to Misrata, east of Tripoli.
The Italian coast is some 300 kilometres (185 miles) from Libya, and there are recurring tensions between Italian and Libyan fishing boats in the area.
Libya has been mired in chaos since the ouster and killing of dictator Moamer Kadhafi in a 2011 NATO-backed uprising.
Two authorities are now vying for power – the GNA based in Tripoli and a parallel administration in the east of the country backed by forces loyal to warlord Khalifa Haftar.
Hafter launched an offensive to take Tripoli on April 4 and fighting continues south of the capital between Haftar’s forces and those of the GNA, including a powerful Misrata militia.