The 41 year old, who was jailed for eight years over the disappearance of nine year old Shannon in 2008, was seen at cafe with people from her Bible study group an undisclosed location in the south of England.
Matthews is said to have started a new life and has been meeting members of the group for advice and encouragement.
Struggling to live on benefit payments of £25 per week, she has been praying every day for the strength to carry on, according to the Daily Mail.
Karen Matthews became a household name when she claimed her daughter had been kidnapped Dewsbury in February 2008, sparking a £5 million police search.
The nine year old was discovered tied-up and drugged 24 days later, less than a mile away in a home belonging to the Michael Donovan, the uncle of Matthews' boyfriend Craig Meehan.
Convicted of kidnap, false imprisonment and perverting the course, Karen Matthews was sentenced to eight years in prison, along with Michael Donovan who received the same prison term.
She was released after serving four years.