The decision follows weeks of uncertainty for Rimsha Masih and her family, who were forced to go into hiding because of the furor surrounding the case that began in August when she was arrested on allegations she burned pages of the Koran, CNN reported.
The high court in Islamabad found the accusations were legally unsound, said Abdul Hameed Rana, one of the girl's lawyers.
"She is a free woman, like any ordinary citizen," Rana said.
Police arrested Masih after she was accused by a neighbor of burning pages of the Muslim holy book, which the girl denied. Human rights activists criticized the decision to try Masih as an adult, saying it was thought she was about 14 years old. She was later released on bail and her case transferred to a juvenile court.
The case took a twist in September when police arrested a local imam on allegations he framed the teenager. Police said witnesses told them they saw cleric Khalid Jadoon Chishti rip pages from a Koran and put them in a bag of ashes cited as evidence against Masih. The imam's lawyers last month said three witnesses recanted their statement during a bail hearing.
Initially, Pakistan's blasphemy laws were instituted to keep religious peace. However, human rights groups have criticized the laws, saying they permit legal discrimination against religious minorities.
CNN said aid groups in the United States, Italy and Canada have offered a home outside of Pakistan for the girl and her family, a family representative said, but the teen wants to remain in Pakistan.