The court was hearing an appeal by Nawaz Sharif, his daughter Maryam Nawaz and son-in-law Mohammad Safdar against the sentences awarded to them on 6 July and also accepted their petitions, reported Dawn.
The two judges hearing the case have a reputation for being independent-minded, lawyers said.
The National Accountability Bureau is expected to appeal the Islamabad High Court's verdict at the Supreme Court.
Sharif, his daughter and son-in-law will now each have to pay 500,000 Pakistani rupees (roughly $4,000) in separate surety bonds before their release.
"The prosecution has failed to show the properties belong to Nawaz Sharif".
Sharif, Maryam Nawaz and Captain Safdar were released on parole last week to take part in last rites of Begum Kulsoom Nawaz who died in London.
Reacting to Wednesday's decision, Senator Javed Faisal, a close aide of Prime Minister Khan, said the court only suspended Sharif's sentence and those of his family members, and did not acquit them.
The Islamabad High Court made the decision on Wednesday on a corruption case handed down to the Sharifs by an anti-graft tribunal earlier this year. While reading the judgment, Justice Athar Minallah of Islamabad High Court said that "the NAB, after conducting a thorough investigation, couldn't bring any evidence of Nawaz Sharif's ownership of the Avenfield apartments, but you want us to admit his ownership on mere presumption".
2 November 2016: Supreme Court agrees to set up a judicial commission to probe corruption allegations against Sharif, stemming from Panama Papers leaks.
13 April, 2018: The Supreme Court further rules Sharif is banned from political office for life.
The three are serving 10-, seven- and one-year prison sentences, respectively.
"It was written in the accountability court verdict that Nawaz had not been involved in corruption", the opposition leader noted, saying that soon Nawaz would be among them.