The 11-year-old boy was seized by three armed men who barged into his classroom in Parang town last June 23, overpowering teachers and school staff who tried to stop them.
The kidnappers demanded a ransom of between P5 million and P10 million and threatened to harm the boy if his parents did not pay.
Police said the boy was apparently taken because his parents owned a chain of hardware stores.
Parang Mayor Talib Abo negotiated with the kidnappers, telling them he had the money and was prepared for an exchange yesterday.
"When the kidnappers called up and they were ready to return the boy in exchange for the ransom, I told them the money is ready," Abo told Catholic-run radio station dxMS.
The kidnappers did not realize they were being set up and abandoned the boy as police swooped down on the agreed meeting place. The suspects escaped and remain at large.