He was found guilty in May in another case related to theft of public funds and has been serving that three-year sentence while under house arrest for medical reasons in an army hospital near Cairo.
Egyptian-American journalist and fellow at the Nation Institute, Sharif Kouddous, (above) told Channel 4 News: “This ruling … is not so surprising. It’s difficult in this moment to have any hope for any kind of democratic transition.
“Right now with this ruling the Egyptian court have not found anyone guilty for the killing of nearly 900 protesters.”
Charges against seven of Mr Mubarak’s senior officials, including his interior minister, were also dropped.
In a separate corruption case, charges were dropped against Mr Mubarak and his sons Alaa and Gamal, with the judge saying too much time had elapsed since the alleged crime took place for the court to rule on the matter.
But the 86-year-old will not yet walk free after the verdict.
Anti-Mubarak protesters grieved and cried following the verdict: “There is no justice for the poor. This is Mubarak’s law.” said Ramadan Ahmed, whose son Mohammed was shot dead in Alexandria.
However those celebrating accused the Muslim Brotherhood of the killings before praising Mr Mubarak.
“No one could remove you. The Egyptian people all love you; from the youngest to the eldest; from the illiterate to the educated,” supporter Naema Mohamed said.
“We adore you. Of course, we agree. I hope God will help you prevail over your enemies. This is not a victory to yourself but a victory to Egypt and its sons.”
The overthrow of Mr Mubarak, who ruled for about 30 years, led to Egypt’s first free election but the winner, Mohammed Morsi, was ousted last year by the army.
The release of some Mubarak-era figures this year had already raised fears among activists that the old leadership was regaining influence.