RIA Novosti said the prosecution asked the Moscow District Court to drop the charges earlier this week, and Friday, the court decided in its favor.
Kratov is the former deputy chief of the Butyrka pretrial detention facility in Moscow and was charged with negligence leading to Magnitsky's death in 2009, while the lawyer was under arrest.
RIA Novosti said Magnitsky exposed what he believed was a $230 million tax fraud carried out by Russian officials, and was then arrested for tax fraud.
RIA Novosti said an independent inquiry ordered by the Kremlin's human rights council found that Magnitsky had been severely beaten before he died, but prison officials said his injuries were self-inflicted.
He spent 12 months in pretrial detention and reportedly was denied treatment for pancreatitis and gallstones.
RIA Novosti said the public outcry that resulted from Magntisky's death led to a U.S. law that imposes sanctions against Russia for human rights abuses.
Magnitsky's family said they will appeal the court's decision.