Local media suggest that scores of militants were released and hundreds of thousands of dollars in ransom was paid to secure the release of Ambassador Tariq Azizuddin and dozens of captured government troops.
The development further fuels a policy debate over the negotiating with Taliban and other extremists, particularly as U.S. officials have warned Islamabad about making deals with fighters in Pakistan.
Azizuddin was kept captive by Taliban fighters for more than three months before he was released to government officials on May 16. The 56-year-old ambassador was abducted in February by a criminal group in Pakistan's tribal region as his limousine approached the border crossing into Afghanistan near the infamous Khyber Pass. The abductors then reportedly passed Azizuddin on to Taliban fighters in South Waziristan who held him until his release.
The day after he was freed, Azizuddin said a Pakistani security operation led to his release. Azizuddin said details about that operation would be revealed in the future.
He credited his release to "the efforts of the government of Pakistan, on the orders of the prime minister, on the order of the adviser for the interior, and on the chain of actions set about on the orders of the adviser for the interior and the Ministry of Interior."
The prime minister's adviser on interior affairs, Rahman Malik, is currently the senior ranking civilian official in charge of security in Pakistan. He claims that "there was no deal involved."
"There was no exchange for terrorists and there was no exchange of any individuals [for the release of Azizuddin]," Malik says.
Despite the government denials, a growing number of reports in Pakistan refute the official version of the story. Media reports have alleged that Islamabad freed up to 55 Taliban militants and also paid out some $287,000 in exchange for the release of Azizuddin and dozens of captured government troops.
Rustan Shah Mohmand, a former Pakistani ambassador to Afghanistan known for his hard-line pro-Taliban stances, tells RFE/RL's Radio Free Afghanistan that he has no doubt that Azizuddin's release was the result of weeks of negotiations between Islamabad and militants.
"I think that [insurgents] were definitely released [by Pakistan's government] and that the release of the ambassador was secured through negotiations," Mohmand says. He insists that "in those talks it was decided that the Pakistani Taliban would release the ambassador in exchange for the release of Taliban prisoners."
Ijaz Khan, a professor of international relations at Peshawar University, tells RFE/RL's Radio Free Afghanistan that "the new reports we have been getting are now similar in almost all newspaper and media outlets."
Khan describes those reports as claiming that the former Afghan Taliban regime's onetime defense minister, Mullah Obaidullah Akhund, and "other high-profile Taliban" were freed by the government. In exchange, he says, reports point to Taliban fighters' release of the Pakistani ambassador and "about 50 Pakistani soldiers and other abductees."
"The Taliban have confirmed this [prisoner exchange] in their statements, but the government has kept silent about it," Khan says. "I think that this release could not have happened without some kind of deal, so these reports about a prisoner exchange appear to be correct."
More recent media reports refute the claim that Islamabad has freed Mullah Obaidullah, saying militants demanded his release but that he had already been handed over to U.S.-led coalition forces in Afghanistan.
Neither the U.S. military nor Pakistan's government would comment to RFE/RL about Mullah Obaidullah's current whereabouts.
Media reports in Pakistan identify freed militants as including Mufti Yousuf -- a top Taliban commander in eastern Afghanistan who had been arrested in Peshawar by Pakistani intelligence officials.
Abdul Rahim Muslim Dost, a former Guantanamo Bay detainee who had been transferred to Pakistan's Inter-Services Intelligence, was also reportedly handed over to militants in Razmak, North Waziristan, on May 17.
The reports say Baitullah Mehsud, a pro-Al-Qaeda Pakistani Taliban leader, was an astute negotiator and insisted that Taliban-held captives would be released only in exchange for prisoners of similar value.
Speculation is likely to continue in the absence of compelling evidence one way or the other.
What is clear about the current situation is that the Pakistani government, sworn in at the end of March, has begun a policy of engagement with the Taliban by negotiating through tribal leaders to persuade Mehsud to end militant operations in Pakistan's tribal areas.
U.S. General Dan McNeill, commander of NATO's 47,000-strong International Security Assistance Force (ISAF) in Afghanistan, says such negotiations have raised concerns within the alliance.
McNeill confirms that NATO has reinforced its troops along the border in case the peace deal enables the Taliban to launch more cross-border attacks into Afghanistan.
McNeill says NATO's analysis of previous peace deals between the Taliban and Islamabad shows that whenever dialogue is being conducted with the Taliban -- or when talks lead to peace deals in Pakistan -- there is a spike in militant attacks on the Afghan side of the border.
U.S. Deputy Secretary of State John Negroponte told a Congressional committee in Washington on May 20 that the United States is "concerned about the possibility of negotiations between the government or elements of the government and these extremist groups."
contributors to this report include RFE/RL's Radio Free Afghanistan correspondents Abubakar Siddique in Prague and Najib Aamir in Peshawar