Farrukh Malik knifed Sarwat, his partner of 37 years, more than 120 times during the frenzied attack at their north London home after suffering 'depressive psychosis' following the death of his mother.
But the 66-year-old accountant, who is now living with his brother in Slough, Berkshire, was set free after a judge ruled he had no power to detain him because of medical reports which state he is no longer a danger.
The fears of one psychiatrist, who warned his condition could deteriorate again, were set aside after two other doctors said he was a low risk.
Malik a father-of-two, must keep seeking treatment for the next two years.
Setting him free, Judge Gerald Gordon stressed the order was 'not a punishment'.
'There is only one reason for making these requirements, and it's to ensure that you do not become unwell again,' he said.
'There is no legal basis that would enable me to make a hospital order.
'If there is any indication that you are, the appropriate action can be taken before anything, let alone the tragic events that did happen, can happen.
'The family will play an important part in keeping an eye on you on a day-to-day basis.'
Referring to the dissenting psychiatrist, he added: 'Clearly one has to be very careful when a doctor raises such concerns, but it is still outweighed by the evidence seen in the court.'
Pakistan-born Malik, who admitted carrying out the killing, was unanimously cleared of murder by reason of insanity following a two-day trial at the Old Bailey last December.
Prosecutors did not challenge the defence.
Jurors cleared him of murder after two psychiatrists said he was suffering paranoid delusions at the time and did not have control over his actions.
Since his arrest, he has undergone eight rounds of electroconvulsive therapy and is said to be responding to the treatment.
Farrukh and Sarwat Malik wed in Pakistan in 1973 before moving to the UK the following year.
He was said to have had a 'good and happy' relationship with the playground assistant and later refused to believe that he had killed her at their north London home.
Since 1975 he had worked for Finchley accountancy firm Jackson, Feldman & Co, where he was described as a 'conscientious and hard-working employee'.
Malik, who visited his home country every year, was in Pakistan in February when his mother died, the court heard.
Following his return to the UK, he suffered a series of health problems including a heart attack and insomnia, before plunging into a deep depression and, in May, threatening to kill himself.
At around 10.45am on the morning of June 20, Sarwat, 60, and daughter-in-law Sara Malik, 23, were with him in the kitchen of the family home in Rosemary Avenue, Finchley.
At his trial last December, prosecutor Philip Bennetts QC said: 'Sara saw the defendant pick up a blunt cake knife.
'He looked at it with a blank expression and appeared to be examining it.
'At around 11am the deceased telephoned his doctor from the living room, and sounded distressed and worried.
'She said "you have to do something immediately", but the defendant took the phone and said words to the effect of "no, I'm fine - my wife is fed up with me, she's trying to get rid of me.
"Do not send anybody."
Just seconds after hanging up, Sarwat Malik followed her husband into the kitchen and asked him what he was doing.
'The defendant replied that he was looking for something sharp,' said Mr Bennetts.
'He went to the draining board and picked up a vegetable knife.'
Grabbing his wife, Farrukh Malik, who has no previous convictions, brought the six-inch blade up to her throat and began slashing frantically.
Sara moved to intervene but then turned and ran after the killer pointed the knife at her.
Following the attack, Farrukh Malik went to the front door of the property - still clutching the bloodstained knife - and stood in the doorway with a 'vacant' expression.
While in police custody later that day, he told a doctor: 'I think I tried to kill her.'
'The defendant appeared to be unable to understand anything but the most simple questions,' said Mr Bennetts.
'He alternated between nodding regularly at the officer questioning him and looking away.
'On the few occasions he engaged with a question, the defendant said he loved the deceased and that she was caring and gentle.
'Whilst he appeared to appreciate that he had been found with a knife in his hand and that he had been arrested on suspicion of murder, he repeatedly said he did not know what had happened or why it happened.'
A pathologist later found around 120 stab wounds to his victim's body, including five 'extensive' injuries to her neck.