"....this appeal is allowed".
She was convicted and sentenced to death, but in a landmark ruling Pakistan's top court has now acquitted Ms Bibi and order she be released.
However, if the court decides to free Bibi, she is likely not safe.
Chief Justice Mian Saqib Nisar announced the verdict to a packed courtroom and ordered Asia Bibi released.
Her husband Ashiq Masih said: "I am very happy". The two Muslim women who pressed charges against Bibi denied they quarrelled with her, saying her outbursts against Islam were unprovoked.
She was asked to fetch water, but the Muslim women objected, saying that as a non-Muslim she was unfit to touch the water bowl.
The women went to a local cleric and accused Bibi of blasphemy against the Prophet Mohammed, a charge punishable by death under colonial-era legislation.
The appeal challenged the Lahore High Court's October 2014 verdict upholding a trial court's November 2010 decision sentencing Bibi to death for committing blasphemy in 2009.
The TLP's leadership called for the death of Nasif, the chief justice, and two other judges on the panel.
Ms Bibi's lawyer Saiful Mulook told Reuters: "It is great news for Pakistan and rest of the world".
Tahir Khalil Singh, one of Asia Bibi's lawyers, told Premier: "I am so satisfied". About 300 police have been stationed to guard the supreme court.
Street protests were spreading by mid-afternoon, paralysing parts of Islamabad, Lahore and other cities.
Pakistan's blasphemy laws and the the capital punishment for breaking them has drawn concern from worldwide rights organizations, "not least because they are sometimes misused to settle feuds, grab land, or persecute religious minorities by making false allegations", NPR's Phillip Reeves has reported.
His announcement is a victory for human rights activists, who say religious minorities in Pakistan are routinely targeted and baseless allegations of blasphemy levied against them to settle personal vendettas.
That same year, Shahbaz Bhatti, a Christian politician, was killed for being a vocal critic of the law.
The Supreme Court on Wednesday ruled in favor of the release of Bibi, who was eight years ago accused and sentenced for "insulting Islam".
The governor of Punjab province, Salmaan Taseer, was murdered in 2011 after he spoke in defence of Bibi and called for reform of blasphemy laws.
The mere rumour of blasphemy can ignite mob violence and lynchings in Pakistan, and combatting alleged blasphemy has become a central rallying cry for hardline Islamists.
Such protests will distract Prime Minister Imran Khan's government, which is attempting to deal with an economy in crisis owing to dwindling finances.
Analysts have warned the tactic could deepen sectarian fractures and potentially spill into violence.