The former Blackwater guards were serving lengthy sentences for their part in the 2007 shooting that left 14 Iraqi civilians dead and 17 others wounded.
Donald Trump has caused further outrage in the dying days of his presidency by granting pardons to four former government contractors who were convicted in a 2007 massacre in Baghdad.
The Blackwater guards were all serving lengthy prison sentences for their part in the massacre, in which more than a dozen Iraqi civilians were killed. The incident caused international uproar over the use of private security guards in a war zone.
Fourteen Iraqi civilians were killed and 17 others wounded.
Supporters of the former contractors had lobbied for the pardons, arguing that the men had been excessively punished in an investigation and prosecution they said was tainted.
The Blackwater firm was founded by Erik Prince, an ally of Trump and the brother of Education Secretary Betsy DeVos. It has since been renamed.
The Blackwater case has taken a complicated path since the killings at Baghdad's Nisoor Square in September 2007, when the men, former veterans working as contractors for the State Department, opened fire at the crowded traffic circle.
Prosecutors asserted the heavily armed Blackwater convoy launched an unprovoked attack using sniper fire, machine guns and grenade launchers. Defense lawyers argued their clients returned fire after being ambushed by Iraqi insurgents.
They were convicted in 2014 after a months-long trial in Washington's federal court, and each man defiantly asserted his innocence at a sentencing hearing the following year.
The American Civil Liberties Union decried the pardons. Hina Shamsi, the director of the organisation's national security project, said in a statement that the shootings caused "devastation in Iraq, shame and horror in the United States, and a worldwide scandal. President Trump insults the memory of the Iraqi victims and further degrades his office with this action.”
Democratic congresswoman Ilhan Omar said on Twitter: "Nicholas Slatten, Paul Alvin Slough, Evan Shawn Liberty, and Dustin Laurent Heard are war criminals."
"Pardoning monstrous criminals will leave a dark mark on the history of presidential pardons."
The pardons reflect Trump's apparent willingness to give the benefit of the doubt to American servicemembers and contractors when it comes to acts of violence in warzones against civilians.
Last November, he pardoned a former US Army commando who was set to stand trial next year in the killing of a suspected Afghan bombmaker and a former Army lieutenant convicted of murder for ordering his men to fire upon three Afghans.
Blackwater contractors were notorious in Baghdad at the time and were frequently accused of firing shots at the slightest pretext, including to clear their way in traffic.
The shooting in the traffic circle stood out for the number killed, but was far from an isolated event.
Trump pardoned 15 people on Tuesday, including a pair of congressional Republicans who were strong and early supporters, and a 2016 campaign official ensnared in the Russia probe.