A woman who drowned her two children in 2003 was released Friday from a state psychiatric hospital after a judge agreed with doctors that she is now mentally stable.

Lisa Ann Diaz drowned her 3- and 5-year-old daughters by holding their heads under water in the bathtub of their home in the Dallas suburb of Plano. Authorities said Diaz had self-inflicted cuts and stab wounds that she later said were an attempt to commit suicide to be with her daughters.

Diaz, tried only in the older child's death, was found not guilty by reason of insanity.

Judge Mark Rusch on Thursday ordered Diaz's release from the Big Spring State Hospital, where she has been for more than two years. He agreed with doctors that the 36-year-old was stable enough to continue treatment for schizophrenia on an outpatient basis.

Diaz's release prompted prosecutors to call for legal reforms that would allow juries in Texas to find a defendant guilty but mentally ill.

"There needs to be a change in the law, something that would allow a person to receive treatment for illness but not escape punishment," prosecutor Greg Davis said. "There needs to be a middle-ground option."

At least 13 other states provide for a guilty but mentally ill defense. Three — Idaho, Kansas and Utah — do not permit any sort of insanity defense.

Davis said he doubts the jury in Diaz's case would have accepted the insanity defense if it knew she would be free two years later.

"What we are always told by defense attorneys is: `Don't worry. She will be in the hospital for a long time — maybe the rest of her life. She'll never pose a threat to society again,"' Davis said. "What this case shows us is this is not always true."

George Dix, a law professor at the University of Texas at Austin, said there is no merit to the argument that mentally ill defendants should have to spend the same amount of time in a hospital as they would in prison.

"The whole idea is that she was found not responsible. Criminal responsibility is supposed to be limited to those who act in a morally blameworthy way," he said.

As part of her release, Diaz must see a mental health caseworker every day and submit to regular blood tests to prove she is taking her medication.

Attorney Robert Udashen said Diaz would live with a relative during her outpatient treatment.