This decision was made so that Lee could take back his place at the International Olympic Committee and form a better situation for the 2018 Olympics to take place in Pyongchang, Lee Kwi-nam told reporters after a cabinet meeting that approved President Lee's pardon.
Lee Kun-hee stepped down from his chairmanship in April 2008 after being embroiled in a scandal where executives in the group were indicted on suspicion of brokering a sweetheart deal that would allow his children to have a greater stake in ownership of Samsung's de facto holding company.
He was cleared of the charge but handed a suspended three-year jail term for tax evasion.
South Korean presidents have a history of granting pardons to the leaders of its large, family-owned business groups, or chaebol, saying their value to the country outweighs the harm caused by white collar crime.
Critics say the leniency shown for corruption is a hindrance to proper corporate governance, which hurts shareholders and diminishes the global reputation of the country's biggest firms.
LITTLE POLITICAL IMPACT FROM PARDON
President Lee, who was a CEO in the powerful Hyundai Group, will likely see little political impact from the decision. His support rate has surged in recent weeks as the country has shown sign of being among the first major economies to emerge from the global slowdown.
Samsung's Lee was granted a pardon in 1997 along with six other tycoons of the country convicted for contributing millions of dollars to a slush fund amassed by a former president.
South Korea, twice unsuccessful in bidding for the Winter Olympics, is to try again to host the 2018 event in the mountain resort of Pyongchang.
Lee gave up his rights and duties as an IOC member due to the tax evasion scandal and, once pardoned, he can resume his membership of the body and boost Pyongchang's bid.
Samsung welcomed Tuesday's decision.
Samsung is pleased that former chairman Lee Kun-Hee has been granted this pardon, it said in a statement distributed by Samsung Electronics, the group's flagship firm.
We expect that Lee will now devote himself fully to supporting Pyongchang's bid.
Under Lee's guidance, Samsung became the country's largest conglomerate with about 60 affiliates, accounting for a fifth of the country's exports.
Samsung Electronics <005930.KS> became the world's biggest maker of memory chips, LCD screens and televisions. The group also includes Samsung Heavy Industries <010140.KS>, the world's No. 3 shipbuilder, and South Korea's biggest life insurance company, Samsung Life.
While Lee Kun-hee has stepped down from the chairman post, he still owns 3.4 percent of Samsung Electronics. His son Jay Y. Lee was named this month chief operating officer of Samsung Electronics in a management reshuffle.
South Korean newspapers reported that the father and son were expected to attend the annual Consumer Electronics Show in Las Vegas in January to meet industry executives. (Additional reporting by Jon Herskovitz and Christine Kim; Editing by Ron Popeski)