The timing is deliberately symbolic - today is the 37th anniversary of Algeria's independence from France. The amnesty covers mainly members and sympathisers of the largest guerrilla group, the Islamic Salvation Army (AIS), military wing of the outlawed Islamic Salvation Front (FIS).
Abdelaziz Bouteflika, the country's civilian president for two months, says the pardon does not extend to AIS members guilty of "crimes or rape". But in unprecedented criticism of previous military governments, he described the cancellation of elections in1992 as an "act of violence" against FIS, which was poised to win. Within weeks, the AIS had been born and the carnage begun.
Mr Bouteflika, a businessman who was foreign minister in the 1960s and 1970s, has put the war death toll at 100,000, although official spokesmen had been claiming it was 26,000.
The president has had to walk a fine line since his election - reduced to near-farce by the withdrawal of all six rivals because of alleged vote-rigging - between the demands of what he called Algeria's two "fundamentalist" movements: the Islamists and the hardline eradicateurs within the military regime who demand only absolute victory over the rebels.
Mr Bouteflika says he will put outcomes to a referendum, but he has repeatedly threatened to resign if he does not get his way. "If the people don't go with me, I'll go home. I'm not going to sit in an armchair."
Algeria's hardline Armed Islamic Group (GIA), has threatened a "deluge of terror" in Belgium and France if imprisoned GIA suspects are not freed. The GIA, blamed for throat-slitting massacres and other atrocities against civilians, is opposed not only by the government, but by the AIS.