Guy Turcotte will be freed pending his first-degree murder trial next September.
Turcotte, 42, is charged in the stabbing deaths of Olivier, 5, and Anne-Sophie, 3, at a rented family home north of Montreal in early 2009.
A jury found Turcotte not criminally responsible in 2011 and he was released from a psychiatric institution in December 2012. The Quebec Court of Appeal overturned the verdict last November, citing errors by the trial judge in his instructions to the jury.
The higher court ordered a new trial, leading to Turcotte's re-arrest in late 2013.
In granting bail, Quebec Superior Court Justice Andre Vincent said Turcotte does not represent a danger to society and is entitled to the presumption of innocence as he awaits the new proceedings.
Vincent did lay out several conditions for Turcotte, including keeping the peace, respecting a 6 p.m.-6 a.m. curfew, reporting to provincial police twice a month and continuing his psychiatric treatment.
He must also stay with his uncle, while his brother has to post a $100,000 bond. Turcotte is also prohibited from being within 100 metres of the residence of his former spouse, Isabelle Gaston, the mother of the slain children.
Vincent's ruling angered Patrick Gaston, Isabelle's brother.
Gaston stormed out of the courtroom when the bail decision was announced, heading straight to reporters to say he's lost faith in the justice system.
"If you think I'm going to close my eyes or shut my mouth, today, no, I have no interest," fumed Gaston, who was wearing a T-shirt bearing the photos of his late niece and nephew.
"Letting him go free ... to the detriment of the families, the well-being of the victims, forget that," he said. "We're putting (first) the well-being of the accused killer, 47 stab wounds with a knife, I remind you.
"It's perhaps spontaneous and a bit direct, what I'm telling you but ... I don't think a child killer should be allowed to walk the streets."
Turcotte told the court during his bail hearing last week he should be freed because it is his right and that he could be of more use to society as a caregiver to some of his relatives instead of spending time in prison.
The Crown prosecutor in the case said Friday he will review the judgment before deciding whether to appeal.
"We're going to take the time to analyze it before making any further comment," said Rene Verret.
"Obviously, we wanted a different conclusion but the judgment is extremely reasoned. He (the judge) has laid out the reasons for reaching that conclusion."
A psychiatrist testifying for the defence explained last week that Turcotte had suffered from a deep depression, including psychotic symptoms, but has improved during the summer and would not represent a danger to society if released on bail.
Turcotte's brother offered to put up $100,000 to secure his release and testified the accused had continued to be surrounded by long-standing friends since his release.