The move to dismiss came after a series of rulings by U.S. District Judge T.S. Ellis III that hurt the government's case, The New York Times reported.
The judge, sitting in Alexandria, Va., ruled that the government would have to prove that Steven Rosen and Keith Weissman knew that their distribution of information would be harmful to the United States and found that the defense could call Bush administration officials, including former Secretary of State Condoleezza Rice.
"The landscape of this case has changed significantly since it was first brought," the Justice Department said in the motion.
The case held one potential embarrassment for the Democratic Party. Rep. Jane Harman, D-Calif., was reportedly recorded promising an Israeli agent that she would seek lenient treatment for Weissman and Rosen from the Bush administration in return for assistance in becoming chair of the House Intelligence Committee. Harman denies any effort to intercede.