On Sunday, the justice ministry said in a statement sent to the Istanbul court trying Orhan Pamuk that it had no authority under the revised penal code to permit a case against him.
The court decided to drop the case after it received that statement, CNN Turk said.
Pamuk was charged under Article 301 of the revised penal code for saying in a Swiss newspaper interview that no one dared discuss the massacre of a million Armenians 90 years ago and the deaths of 30,000 Kurds in the past 20 years.
The European Union has criticised the case and said it raised concerns over Turkey's commitment to European values.
Pamuk's trial in Istanbul was adjourned shortly after it began on 16 December to give the justice ministry time to decide how to proceed, effectively passing responsibility of the case to the government.