The boys, 9 and 10, were being investigated for allegedly urinating on the sacred book and leaving it next to a mosque in a small village in the Nile Delta, Bikyamasr.com reported.
Gamal Eid, one of the lawyers representing the boys, said Wednesday a deal between Muslims, Christians and security officials in the area had resulted in the closure of the case, dropping of the charges and release of the boys.
The father of one of the boys said his son, who cannot read or write, had found a small bag containing pages from the Koran while looking through trash and placed the bag next to the mosque because he didn't know what to do with it.
The village, Bani Sweif, has about 157 Christian families. Security was greatly increased in the town over fears of confrontations between the residents.