A Pakistani court acquitted Davis, who shot and killed two men in the Pakistani city of Lahore on January 27 in what he said was a robbery attempt, of murder charges and released him on Wednesday after what some officials said was a deal that involved paying "blood money" to the victims' families.
Davis' release ends a weeks-long standoff that inflamed already strained ties with Washington, which has leaned on Pakistan to crack down on militants who are making it hard for President Barack Obama to finally end the Afghan war.
After weeks of unusually public pressure on Islamabad to declare Davis immune from prosecution, officials in Washington sought to put a bright face on the situation on Wednesday, saying his release meant a return to business as usual.
But when it comes to secretive, high-stakes U.S. ties with Pakistan, a shaky democracy, nuclear power and a big recipient of U.S. military aid, that business is anything but ordinary.
"While one diplomatic dispute between the U.S. and Pakistan has found resolution, the fundamental challenges to the relationship certainly remain," said Lisa Curtis, a South Asia expert at the Heritage Foundation.
One such challenge is the conundrum facing Pakistan's unpopular President Asif Ali Zardari, who needs U.S. funding but whose political future could be cut short if he exposes himself to anti-American sentiment growing across Pakistan.
The Obama administration meanwhile is frustrated by its inability to coax the Pakistani military to act more strongly against certain insurgent groups sheltering in Pakistan.
A Pakistani official, speaking on condition of anonymity, said Washington and Islamabad would now work to reschedule high-level meetings that were put on hold after Davis' arrest.
"Officially, we expect things to be the same, but there will definitely be some footprints left on the long-term relationship -- and a trust deficit on both sides," he said.
INTELLIGENCE TIES BRUISED
Davis' release clears the way for unfettered U.S. drone strikes on militants in Pakistani tribal areas, which were halted for weeks after Davis' arrest in a long pause seen as linked to the tension over his fate.
A senior U.S. defense official, speaking on condition of anonymity, said he expected no lasting impact to military ties, offering as proof military cooperation against insurgents along the Afghan border that continued during Davis' detention.
Ripples from the case may be more acutely felt in joint efforts between the CIA and Pakistan's ISI spy agency.
Daniel Markey of the Council on Foreign Relations said the affair may limit future U.S. intelligence in Pakistan, where it is believed CIA personnel have sought to supplement information provided by the ISI on groups such as Lashkar-e-Taiba -- anti-India militants sometimes allied with the Pakistani Taliban.
The group has been close to Pakistani army and ISI in the past.
"It's only natural that the U.S. government would want to know what these groups are doing; it's only natural (Pakistan) wouldn't want us to know what they're doing," Markey said.
A person familiar with the Pakistani government's version of the deal to release Davis said that after extensive talks between the CIA and ISI, Pakistan will tighten its rules on the entry and local operations of CIA personnel and contractors.
"While resolution of the Davis case may help to cool tempers ... in the immediate term, so long as Pakistan resists taking serious action against terrorist groups ... tensions in the relationship will persist," Curtis said.
Davis' detention is also likely to deepen suspicions in the U.S. Congress, where lawmakers already facing pressure to cut spending are looking askance at generous U.S. military aid to Pakistan, expected to be about $3 billion this year.
"That a recipient of tens of billions of dollars of U.S. aid would treat our people in such a way is shocking," said Dana Rohrabacher, a conservative lawmaker from the Republican Party, which controls the House of Representatives.
"And (it) should suggest that we take a close look at the fundamentals of who we give our aid to and whether or not they are our friends or whether they are treating us like suckers."