As you probably know, AT&T started unlocking off-contract iPhones from April 8th.

The process to get your off-contract iPhone is very simple as we’ve explained earlier. However, if you follow the instructions sent by AT&T then you could end up losing your jailbreak, which is one downside.

If you don’t want to lose your jailbreak then we have some good news. Redsn0w – the popular jailbreaking tool by iPhone Dev team can be used to unlock your off-contract AT&T iPhone without losing the jailbreak by following these simple steps:

Some important points:

• Some users have managed to get the “Congratulations, your iPhone has been unlocked.” by simply removing their SIM card and inserting it again and launching iTunes. Follow the instructions below if this doesn’t work for you.
• Follow these instructions only after you get a confirmation from AT&T that your iPhone has been unlocked with the steps mentioned in the image below. If you haven’t requested for the unlock then check this post for more details.
• This method will work with only off-contract AT&T iPhone 4 and iPhone 3GS.
• Users without an off-contract AT&T iPhone can check out this method to unlock iPhone using SAM.

Step 1: Download Redsn0w for Windows from this link and Redsn0w for Mac from this link and save the application in a folder named “Redsn0w” on your desktop.

Step 2: Double click the Redsn0w zip file and extract the application to the Redsn0w folder. Navigate back to the Redsn0w folder and launch the Redsn0w application.

Step 3: After launching Redsn0w, click on the Jailbreak button.

Windows 7 users should run the exe in Windows XP compatibility mode (right-click on the Redsn0w exe and select Properties, then select the Compatibility tab and select Run this program in compatibility mode for Windows XP). Windows XP and Windows 7 users should run Redsn0w as ‘Administrator’ (right-click on the Redsn0w exe and select ‘Run as an Administrator’).

Step 4: You will now be prompted plug your iPhone to the computer and switch it OFF. Follow the instructions and click on ‘Next‘ to move to the next screen:

Step 5: You will now need to put your iPhone into the DFU mode. Redsn0w will take you through the necessary steps:

(a) Hold the Power button on iPhone down for 3 seconds:

(b) Now simultaneously hold the Home button and keep the two buttons pressed for 10 seconds:

(c) Now release the Power button while keeping the Home button pressed until Redsn0w detects the device.

Step 6: Your iPhone should reboot now. Please remember to release the Home button.

Step 7: Redsn0w will now start preparing the jailbreak data.

Step 8: You will now be prompted to select the jailbreak options you would like. Please deselect Install Cydia and select Deactivate options.

Step 9: If you’ve deselected the Install Cydia option and selected the Deactivate option, click on the Next button. You will now see lines of code scrolling on your screen. Wait for your iPhone to reboot.

Step 10: After your iPhone has rebooted, launch iTunes and you should get the message “Congratulations, your iPhone has been unlocked.”

That’s it, your iPhone should be unlocked so that you can use a SIM from any other GSM carrier.