"The United States strongly condemns the release of Lashkar-e-Tayyiba (LeT) leader Hafiz Saeed from house arrest in Pakistan and calls for his immediate re-arrest and prosecution", White House Press Secretary Sarah Sanders said.
"I'm happy that no allegation against me was proved", Saeed told supporters after his release, according to a video released by the Jamaat-ud-Dawa (JuD) Islamist charity, which he heads.
Pakistan officially banned the Lashkar-e-Taiba in 2002. Saeed's release will further strain Indo-Pak ties which have already been ambushed since the last 70 years of Independence. "The Pakistani government now has an opportunity to demonstrate its seriousness in confronting all forms of terrorism, without distinction, by arresting and charging Hafiz Saeed for his crimes", the White House said.
"He was not only the mastermind, he was the prime organizer of the Mumbai terror attacks in which many innocent Indians and many people from other nationalities were killed", spokesman Raveesh Kumar said in a statement.
Saeed blamed India for his incarceration in Pakistan, saying "Pakistan's rulers detained me on the aspiration of Modi due to their friendship with him".
Pakistan has been detaining and freeing Saeed off and on since the attacks that left 166 dead, including several Americans.
"This could move the us closer to adapting a largely symbolic but nonetheless major punitive step - the revocation of Pakistan's non-NATO ally status, which would be a big reputational blow for Pakistan", Kugelman said.
In an earlier statement to the Indian media, Bruce Riedel, who headed the team that formulated the Obama administration's Afghan policy, urged Washington to take strong action against Pakistan for releasing Saeed.
Saeed's release could once again sour US relations with nuclear-armed Islamabad, which had seen an apparent improvement after the rescue by Pakistan's military of American hostage Caitlan Coleman and her family on October 13.
The Dawn report says that Hafiz Saeed accused India of "funding and fueling terrorism and extremism in Pakistan" and claimed that evidences were available to substantiate this.
Non-NATO ally status is a designation given by the U.S. government to close allies who have a strategic working relationship with U.S. Armed Forces but are not members of the North Atlantic Treaty Organization. "They play everyone, whether it's China or the terrorists or us".
For years, the Pakistanis have been blamed by the USA for not doing enough in their counterterrorism efforts to end the Afghan war - the longest military engagement in America's history.
Pakistan won major non-NATO ally status in 2004 from the George Bush administration, in what was at the time seen in part as recognition of its importance in the US battle against al Qaeda and Taliban insurgents.