Militants in the southern Philippines have released an Australian hostage who was kidnapped 15 months ago.

Warren Richard Rodwell was brought to police by residents of Pagadian city who saw him walking before dawn near the fishing port, where his abductors dropped him off.

Mr Rodwell, 54, a former Australian soldier who was married to a Filipino woman and had settled in the southern Philippines, was kidnapped in December 2011 from his seashore house in Ipil township west of Pagadian.

He was taken by boat to nearby mountainous islands where Abu Sayyaf militants hide. The group are linked with al-Qaeda.

Mr Rodwell had since appeared in several proof-of-life videos posted by the militants as negotiations for his release dragged on.

His jungle captivity appeared to have taken a toll on his health as he appeared weaker in each video.

Military officials said Mr Rodwell was held in recent months in the militants' jungle hideouts on Basilan Island, but had also been moved to nearby islands.

A police spokesman said Mr Rodwell was medically examined after his release, which was welcomed by Australian Prime Minister Julia Gillard.

She also paid tribute to the Philippine government and agencies who helped to secure Mr Rodwell's release.

A Philippine security official, speaking on condition of anonymity because he was not authorised to speak to the media, said a ransom was paid for Mr Rodwell's release, as was usually the case with other hostages held by the Abu Sayyaf over the last two decades.

Both the Australian and Philippine governments have strict policies of refusing to pay ransoms.

That left Mr Rodwell's family to struggle to raise funds, including selling some of their properties, according to an official confidential report seen by The Associated Press.