Vanunu's lawyer, Avigdor Feldman, also said there was a possibility that his client would be released altogether next month when he completed two- thirds of his 18-year sentence.
Vanunu, who was convicted of treason for giving information about Israel's nuclear programme to the Sunday Times, has been held in isolation since 1986. Israeli security services had argued that Vanunu, 43, must be kept isolated so he could not pass on any further information about Israel's nuclear capabilities.
The Justice Ministry told the Supreme Court that Vanunu would retain his own cell, where he has been held in isolation, but would be allowed to leave it during the day, meet other prisoners and invite them to his cell if he wished.
The attorney general and justice ministry officials made their decision to release Vanunu from isolation because they felt the security argument would not stand up before the High Court, the Haaretz newspaper reported.
Mr Feldman said he had spoken to Vanunu on the telephone, and he had confirmed that he had just left his cell and paid his first visit to other wings of the jail, where he spoke to other prisoners for the first time.
The lawyer said the Israeli government had apparently changed its position, in part, because of international pressure. Several human rights groups and foreign leaders, including the Prime Minister of Norway, have taken up Vanunu's case, he said.
The isolation has also left its mark on Vanunu, Mr Feldman said. "Isolation can have an impact on mental stability, and there is a possibility that such an impact occurred," he said.
In April, Vanunu will have served two-thirds of his sentence, and will be eligible for early release. Mr Feldman said he had sensed misgivings among government officials about the harsh way in which his client had been treated. "I wouldn't say it's a totally fantastic possibility that he would be released," the lawyer added.
Vanunu, a former technician at Israel's nuclear reactor in Dimona, was convicted of espionage after supplying photographs taken inside the plant to the Sunday Times.
Based on the information, nuclear experts estimated that Israel had the world's sixth-largest arsenal of nuclear weapons.Reuse content