The vessel and its crew will be released "at the military boundary in the East Sea," North Korean state news agency KCNA reports.
The decision was made after the crew apologised for the "offence", it adds.
It comes at a time of heightened tension in the region with both sides running a series of military exercises.
North Korea said the release of the fishing vessel, due later on Friday, follows an admission of wrongdoing from those on board, who it said had "repeatedly asked for leniency".
