Depends on which movie you are talking about. If you are talking about the original theatrical release, perhaps Gaff was more interested in getting rid of Deckard (since Deckard had indicated that Gaff was ambitious to get ahead) than he was in getting rid of Rachel and he figured that letting her live was the best approach to getting rid of Deckard. Or, perhaps he really felt empathy for Deckard and decided to cut them a break.

If you are talking about that ridiculous mess that is the "Director's Cut", why do you imagine Gaff would be gunning for Rachel? In the Director's Cut we don't even know who Gaff is, really -- if not for one brief scene with Bryant (or the credits) we wouldn't even know his name. When we see Gaff, while he clearly works for the police department, he doesn't seem to be a policeman.

Other than the opener where the Chinese guy claims that he said "You're under arrest" (with the subsequent scene making it clear that he wasn't) Gaff never does anything like police work. He runs errands for Bryant, he drives Bryant and Deckard around, he sometimes winds up where Deckard is working but does no actual work himself. Heck, we don't even find out until the end of the movie that he can even speak English.

He seems to be little more than a driver/gofer. As for the whole unicorn thing, the claim that he must have known about Deckard's dream because Deckard is a replicant is pretty much nonsense.

Gaff wasn't at the meeting with Tyrell, he never heard about the implanted memories and there was never any discussion of Deckard having such memories, anyway, so how would Gaff know that, even if it were true?

More likely, Deckard told him about his dream one of the times Gaff was driving him around and while waiting for Deckard at his apartment, Gaff created the origami unicorn. There's no reason to believe that he was there for Rachel.

I don't find it unlikely, at all, personally.

Why was Deckard brought in for the Nexus 6 breach? Because the Blade Runner who was investigating the case (Holden), who was supposed to be pretty good at his job, got smoked by Leon. So why wasn't Gaff given the assignment? Because he's clearly not thought of as in the same league as Deckard.

Now, perhaps he's more a political hack and boot-licking toadie who wouldn't be all that interested in getting that much action anyway, but the fact is, he and Deckard clearly don't have a "comrade" relationship. They irritate each other, Deckard doesn't necessarily respect him, and Deckard is more highly thought of.

Given that dynamic, wouldn't Gaff want Deckard to be gone? Why is Deckard leaving? Because Rachel is in danger, so he's going to spirit her away to protect her.

What happens if Gaff "retires" her? Deckard has no reason to leave, and he's still around, but more pissed off with a serious grudge against Gaff. When tough cases are around, Deckard can be called in to resolve them, making Gaff look useless (as opposed to a tough case not being solved by anyone, which doesn't make Gaff look as bad in comparison, because there is no comparison).

Rachel being alive means Deckard leaves and probably won't come back, so he lets her live. This removes the sentiment and generosity factor that you find difficult to believe, which seems reasonable, and makes it about self-interest.

Empathy for Deckard

It's the obvious explanation, after all. That doesn't guarantee its truth, but it does mean we should consider it first, and only discard it if we have good reason.

Here are some facts to consider:

• Gaff knows that Deckard has feelings for Rachael

We don't get much Deckard+Gaff time, so we don't see Deckard tell Gaff about his feelings (and I doubt he would), and so we must reach this conclusion by implication.

We know that Gaff tracks Rachel to Deckard's apartment.¹ Once he realized Rachel was hiding in Deckard's home, an obvious question would have presented itself: why would a professional killer of Replicants be harboring a fugitive Replicant he's under direct orders to kill (and who happens to be a best-in-class simulation of a beautiful woman)?

The genre of hard-boiled detective fiction overwhelmingly presents one reason for such an arrangement: because the detective has fallen in love with the beautiful woman he's supposed to be investigating. And, as a rule, characters in the genre are very aware of that danger (i.e. it's not just meta-knowledge available only to the real-world audience).

• Deckard has earned Gaff's respect

Gaff does not seem to care for Deckard very much at the beginning of the film. But in the moments after Roy Batty dies, Gaff appears and says: "You've done a man's job, sir!" I am quite certain that Deckard is necessarily human, and so the significance of this statement is just that it is well-earned praise.

There is also credible reason to believe that Gaff's use of language is a signal of his improved opinion of Deckard: at the beginning, Gaff literally refuses to speak to Deckard in English, but at the end he does, to praise and empathize.

• Gaff knows that Rachel has an expiration date

Nexus 6 models have a four-year lifespan. That means "the Rachel problem" will eventually resolve itself. Gaff knows this because he is present when Bryant shares this information with Deckard.

He proves that he knows it by his other statement to Deckard at the end: "It's too bad she won't live." Importantly, he doesn't say:

• It's too bad you have to kill her
• It's too bad I'll have to kill her
• It's too bad blade runners will pursue her until one of them succeeds

He said precisely what he meant.

• Gaff believes Rachel is not dangerous

Rachel has not attempted to hurt any humans, unlike the other six Nexus 6 Replicants who are part of this incident. (I am including two that we never meet because they are killed by an electrical field trying to infiltrate Tyrell's HQ, as related by Bryant during the initial briefing.)

Importantly, Rachel does kill a Replicant: she fatally shoots Replicant Leon, saving human Deckard's life. This happens after she learns that she is herself a Replicant. She is a Replicant, but she still identifies with humans.

Thus:

Gaff takes a calculated risk when he decides to spare Rachel's life. He does it for the sake of a colleague he has come to respect, a man whose judgement about Replicants has proven very reliable, a man who has just barely survived extraordinary dangers doing a job that might well have fallen to Gaff. And he knows that this gift is both a blessing and a curse, that Rachel will expire before too long and break Deckard's heart, that Deckard also knows this and still chooses it.

Gaff does it out of empathy. Which is only fitting.

^{1 The proof that Gaff tracks Rachael to Deckard's apartment is the origami unicorn he leaves at Deckard's doorstep. I'm not sure if that detail is in every version of the film; I only have access to the Director's Cut, and it's my understanding this might be a late addition intended by the director to bolster his attempt to ret-con Deckard into being a Replicant. I think my interpretation still works without this detail, because Gaff knows that the only reason Rachel would still be alive is that Deckard has chosen to disobey orders and not kill her. Since he hasn't reported her dead or turned in the body, Gaff presumes she is alive.}