Nine people were killed in the bombing in northern Israel, judicial sources said.
Yasra Bakri, from Bi'na village in the Galilee region, was arrested in August 2002 on charges of having failed to alert the authorities about a bomber on the bus.
According to the indictment, Bakri and her friend allegely got off the bus near the northern town of Sfat shortly before the bomber detonated his explosives, killing nine and wounding 50.
The prosecution claimed Bakri and her friend had been warned off by the bomber, but the judge at Nazareth magistrates court said there was no basis for the claim that Bakri knew the bomber was about to blow himself up.
"Most of the facts in the indictment were not under dispute. The outstanding dispute between the sides was over the existence of 'knowledge' necessary for the felony of not preventing a crime," the court said in its ruling.
"The defendant could not have known what thoughts were in that man's mind, nor what plots were hatching in his heart. All she could learn about his thoughts and plans were what he chose to make clear," it said.
'I was innocent'
Bakhri denied any wrongdoing, saying she at first thought the man was subjecting to her to a form of sexual harassment she had experienced on other bus trips. She said she got up in a panicked daze and disembarked at the next stop.
Israeli buses have been routinely
targeted by Palestinian groups
"I knew all along I was innocent. I hope this is all over. At the end of the day, justice was served," Bakhri told Israel Army Radio after the verdict.
Bakhri told Reuters in an interview at her home in 2002, after her release to await trial, that her parents had raised her in a spirit of non-violence and co-existence with Jews in Israel and that she had Jewish friends and spoke Hebrew.
After the bombing, the two went to a local police station to give testimony and Bakri was arrested.
Also, Israel is to extend the opening hours at the Allenby Bridge crossing between Jordan and the West Bank to Palestinian pilgrims returning from Saudi Arabia, Palestinian border police said Monday.
"The Israelis told us they will open the bridge for three days from 7:30 pm tonight (Monday) to allow the return of pilgrims who have been to Mecca," a source told AFP.
Over the three days, the bridge will remain open for 24 hours, he said.
Normally, the bridge is open for seven hours a day during the week and four hours a day on weekends.