The 41-year-old S.M. was arrested when he came to collect his identity card.
According to police information, the suspect was a member of paramilitary troops between 1991 and 1995.
Police have charged him with participating in the shelling of the central Croatian town of Gospic and the wider area in his capacity as commander of a paramilitary unit.
The suspect was released at 1300 hours on Friday after the county state prosecutor's office assessed the evidence collected was not sufficient to launch an investigation and ordered the continuation of evidence collecting.