Mr Doherty, 67, was found at his cottage in Drumanacoo, Glenswilly in the early hours of Sunday morning. He had been strangled.
The woman, in her 50s, was arrested yesterday morning and taken to Letterkenny Garda Station for questioning.
She was released without charge this afternoon, a Garda spokesman said.
A man in his 40s who had also been arrested was released without charge last night. A file is being prepared for the DPP.
Garda sources however are insisting that the murder investigation is “intense and wide-ranging.”
Neck injuries discovered by State Pathologist Dr Marie Cassidy suggest Mr Doherty was strangled.
His body was found in the bathroom of the family cottage.
“The investigation is continuing and we are following several definite lines of inquiry,” said one source.