In a 2-1 ruling Thursday, the Texas 3rd Court of Appeals said "we reverse the judgments of the trial court and render judgments of acquittal."
In 2010, an Austin jury found DeLay guilty of money laundering and conspiracy to commit money laundering for helping to illegally funnel $190,000 in corporate donations to Republican candidates running for the Texas Legislature in 2002.
DeLay had been sentenced to three years in prison, but his sentence was delayed during the appeal process.
DeLay was collecting checks, moving the donations through a political action committee and distributing the funds to candidates, which was found at the time to have violated state money-laundering statutes.
But the appellate court said evidence in the case against DeLay was "legally insufficient to sustain DeLay's convictions."
DeLay, 66, a conservative Republican from Sugar Land, outside Houston, was elected to the Texas legislature in 1978 and moved on to the U.S. House in 1984.
In 2005, DeLay was indicted on charges that he had conspired to violate campaign finance laws by soliciting donations from Enron and other corporations to help finance redistricting in Texas to favor Republicans. DeLay denied the allegations but resigned as majority leader.