The pardon, countersigned by outgoing Prime Minister Prayut Chan-o-cha, cited Thaksin's respect for the monarchy and his contributions to the nation and its people while in office.
Thaksin had respected the legal process, acknowledged his guilt, repented, and accepted the judgments, it said.
It added that the former premier, 74, is ageing and suffers from health problems that require expert medical care.
The King granted the royal pardon so that Thaksin could use his knowledge, abilities and experience to benefit the nation, society and people in the future, the pardon said.
Thaksin returned from 15 years of self-exile abroad on August 22 and was promptly ordered by the Supreme Court to serve eight years in prison over cases dating back to his time in power:
• Three years in jail for abusing his authority to order the Exim Bank to approve a loan of 4 billion baht to Myanmar.
• Two years for illegally ordering the launch of the lottery.
• Five years for abusing his authority to have a Shin Corp concession contract amended so that it paid excise tax for mobile services instead of concession fees.
The way Thaksin’s return has been handled has sparked allegations of preferential treatment for the ex-PM, whose Pheu Thai Party now leads the government coalition after coming second in May’s election.
His daughter Paetongtarn Shinawatra, however, refuted the allegations and said that concern remains over the health of her father, who is now being treated at the Police General Hospital in Bangkok.