The dramatic rescue took place on Wednesday on the island's 3,700 metre high volcano.
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Another 100 people stranded at the top of the cable car base, including several children, are this morning being led back to safety on foot after spending the night in a refuge half way up the volcano and in the cable car station itself.
Helicopters, firemen and police were called in to help with a pulley system to get the trapped tourists in the two cable cars back on the ground.
One by one, they were lowered to safety during a four hour rescue operation. Each one was placed in a harness and then dropped through the hatch of the cable car. They were all given warm clothes, blankets and food because the temperature so far up at night can drop to zero and even below.
The cable cars automatically stopped half way up the volcano
There were no fatalities and it is understood no-one was hurt. However, there are reports of some of the people needing treatment for shock and altitude sickness.
There were 35 people in each of two cable cars which were automatically stopped half way up the volcano, the highest mountain in Spain and a major tourist attraction.
There is already widespread praise for the heroics of the rescuers who worked flat out to get people down safely.
The incident happened at about 2pm on Wednesday afternoon, suspending the tourists in mid-air and only concluded at 7pm just before it got dark.
One by one the 35 passengers in each cable car were lowered to safety
Many of them are understood to be Brits as Tenerife is a favourite destination for UK holidaymakers.
About 200 people were also at the top of the cable car, having visited Mount Teide and were waiting to go back down.
Half of them were able to walk to safety despite the rocky terrain but a group of people with reduced mobility stayed the night in a refuge on the mountain.
They included a number of elderly holidaymakers and families with children. It is understood there were about 100 of them whose walk to safety began at first light today.
About 50 Tenerife firefighters freed those trapped in the cable cars using a pulley system from the ground to the cars which involved an "abseil" with ropes.
The Canary Government officially activated its emergency plan and a massive team, including the police and Red Cross, was involved in the rescue.
A spokesman for the cable car operator said the emergency system had stopped the cable cars midway, presumably having detected a fault or problem. The exact cause will not be known until today (Thursday) but a full rescue plan had already been prepared in case it was ever needed.
The stuck cable cars were about 40 to 50 metres above the ground. One French couple on board said they felt a "strong blow" as the cable car shuddered to a halt.
Tenerife's island council said the rescue had gone very smoothly and there had been no risk involved.
A team of psychologists was called in to help any of the tourists suffering from trauma.
The base station of Teide Cable Car is located at the foot of the volcano, at an altitude of 2,356 metres, and the station exceeds 3,555 metres.