Alket Rizaj, who said he was armed with grenades and explosives. took the hostages on Saturday at the Malandrino prison in central Greece.
Mobile phone photos showed a man posing alongside six men, at least some of whom appeared to be prison officers.
Greek commandos are said to have freed one captive during the siege.
Smoke bombs were hurled during the operation, according to Greek news website Parapolitika.
Rizaj decided to surrender when he realised he would be overwhelmed by the police's special forces, Greece's Ekathimerini newspaper reports, quoting officials.
The officials said that his claim to be in possession of explosives was a bluff and that he was armed only with makeshift knives.
The paper adds that two other prisoners were arrested on suspicion of helping Rizaj take the hostages.
Rizaj had been demanding a getaway car, Greek officials were quoted as saying by AP news agency.
The photos purportedly of the hostages were sent to an Albanian TV station by an unnamed prisoner.
Rizaj, who has two convictions for murder, escaped in June 2006 and February 2009 from Korydallos maximum security prison in Athens.
He got away both times by helicopter and both times along with bank robber Vassilis Paleokostas.
The Albanian was recaptured in November 2009, when he was found with a female companion at a property near the town of Marathon.
The Korydallos jail's director and the inspector of prisons were fired after the second escape.
Source: BBC News
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