Kim, who had been living in exile for several years, was killed at Kuala Lumpur's airport on Feb.13 in a freaky assassination using VX nerve agent, a chemical so lethal that it is on a United Nations list of weapons of mass destruction.
The two countries had been locked in a diplomatic row in the wake of the killing in Kuala Lumpur last month.
But on Friday, in the wake of the larger political deal with North Korea, Khalid said authorities recorded statements from the men and released them.
Suggestions of North Korea's involvement also lowered the country's already paltry standing on the world stage, analysts said, and reminded the globe about the risks of dealing with Pyongyang.
Malaysian nationals who were detained in North Korea returned home after three North Koreans were released and allowed to board a flight to Beijing.
North Korean officials quickly opposed any autopsy, refused to allow access to the North Koreans sought by Malaysia, and demanded that the body be promptly handed over to them.
Earlier, sources told Reuters authorities were preparing to transport Kim's body on Malaysia Airlines flight MH360 to Beijing, en route to Pyongyang.
Oh Ei Sun, an adjunct senior fellow with Singapore's Rajaratnam School of International Studies, said it was not a surprise that North Korea did well in the negotiations.
Kim Jong-nam, who was the estranged, elder half-brother of Kim Jong-un, had been passed over for the North Korean succession and was living in the Chinese territory of Macau at the time of his death.
"They will likely use the body to claim they were not responsible and tell an alternative narrative", said Bridget Welsh, an expert on Southeast Asian politics.
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Britain had hoped the threat of sanctions would strengthen Tillerson's hand in talks with Russian Foreign Minister Sergey Lavrov. Since late 2012, there have been some 64 alleged attacks, employing various toxic chemicals, ranging from chlorine to sarin gas.
"After we have clocked out, we could still see them working".
North Korea's official Korean Central News Agency confirmed the agreement, saying the two sides had pledged to "guarantee the safety and security" of each other's citizens, and that Malaysia had agreed to transfer the body "to the family of the deceased" in North Korea.
On Thursday, Mr Najib said a formal request had been received from the family, but did not give further details.
Although Malaysia has never directly accused North Korea of carrying out the attack, speculation is rampant that it orchestrated a hit on a long-exiled member of its ruling elite. They are now believed to be in hiding.
Police said the other three men are believed to be hiding in the North Korean Embassy in Kuala Lumpur.
Malaysia expressed outrage earlier this month over what it described as North Korea holding its citizens hostage. "So, we allowed them to go", he said, giving an assurance that their departure would not affect investigations into Jong-nam's murder.
The Malaysians who had been held in Pyongyang, three embassy staff members and six family members, were banned from leaving North Korea during the diplomatic spat.
Under the terms of the swap, nine Malaysian nationals who had been trapped in North Korea for more than three weeks arrived back home early Friday - in exchange for the release to Pyongyang of Kim Jong Nam's body, along with the men wanted for questioning over his death.
North Korea has denied any role in the killing.
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