Thirty-nine-year-old Assange, an Australian national who is wanted in Sweden for alleged sex offences, was granted bail at a court hearing on Wednesday after his supporters agreed to post a 2,00,000 pound (Rs 1.4 crore) deposit.
However, he was later told that he would remain behind bars after Swedish authorities said they would appeal against the bail before the full extradition hearing begins next year.
The appeal was lodged after District Judge Howard Riddle told Assange he could be released from Wandsworth Prison in southwest London on the condition that he will have to reside at the agreed address of a former British army officer.
Captain Vaughan Smith, founder of the journalists' Frontline Club, offered to house Assange at his estate in Suffolk. But, he admitted after the hearing at city of westminster magistrates' court that harbouring the former hacker could put his own safety at risk.
As a condition of his bail, the Wikileaks founder must live at the home of Smith.
Smith told BBC Radio, "I've obviously taken a very public position to say I support him as an individual that's not to say that I agree with everything that is being leaked. "But certainly, as a person, I think it's very important he receives proper justice and I'm very pleased he was given bail on Tuesday."
Smith said Assange was "very committed and courageous", but had been portrayed by some as "a Machiavellian, cold, string-puller".
"I think we have to find a tolerant way of dealing with people even if we don't agree with them," he said, adding that the response of the Swedish authorities "looks like vengeance".
Meanwhile, Assange's lawyer Mark Stephens said half of the cash required by the court for Assange's bail had been collected and dismissed suggestions that the WikiLeaks founder would try to flee the country if released on bail. "The suggestion that he is a flight risk is faintly ludicrous," he told BBC television.
As per the bail condition, Assange will have to wear an electronic tag that would allow British authorities to locate him all the time, the lawyer said. But, he complained that the prison officials were increasingly making it difficult for lawyers to meet Assange and prepare his legal case. "I can't get access to him," he said. "I will not be able to take instructions from him."
The Australian, who was accused of sexual misconduct by two women in Sweden, is resisting an extradition claim by the country.
As part of the bail conditions, Assange must also surrender his passport. A number of high-profile individuals including Mick Jagger and Jemima Khan are willing stand guarantee for Assange.
Assange, who has earned the wrath of the US for leaking a huge cache of secret diplomatic documents, has been imprisoned for a week now after he gave himself up to Scotland Yard in London. He is accused of having unprotected sex with a woman, identified only as Miss A, when she insisted he use a condom. He is also accused of having unprotected sex with another woman, Miss W, while she was asleep.
The WikiLeaks founder denies sexually assaulting the two women in Sweden and claims the charges are politically motivated.
In recent weeks, WikiLeaks has published a series of US diplomatic cables revealing secret information on topics such as terrorism and international relations.
Assange was refused bail last week despite the offer of sureties from figures including film director Ken Loach, journalist John Pilger and Jemima Khan, ex-wife of Pakistan cricketer Imran Khan.
In his first appearance at court last week, District Judge Howard Riddle refused Assange bail on grounds that he could flee.
