Al Saadi al-Qadhafi stood trial after he served a three-month drugs ban from Italy's top division, Serie A, in November 2003 while he was playing for Perugia.
A judge ruled on Thursday that the case was outside of the court's jurisdiction.
Giovanni Guaglianone, al-Qadhafi's lawyer, said the court acknowledged that al-Qadhafi did not commit any crime in Italy.
Al-Qadhafi did not attend the hearing.
The Libyan had a somewhat unusual playing career in Italy.
Despite affirmations that he would be treated like any other player when he signed for Perugia in June 2003, the opinion remained that he was not recruited solely for his prowess on the field.
He was previously the owner, manager and captain of Libyan club Al-Ittihad and owned a small stake in European giants Juventus, which he relinquished after joining Perugia.
Only months into his Perugia contract, al-Qadhafi tested positive for a performance-enhancing drug and was banned for three months.
He denied intentionally using the drug and said the medicine he took for back pain probably caused the positive result.
Al-Qadhafi rarely played for Perugia, making only one league appearance as a substitute in May 2004 against, predictably, Juventus.
After the club's relegation, he signed a contract with Serie A side Udinese last year, coached by his former manager at Perugia.
Again he made only one appearance, in a pre-season friendly, and was believed to have left the team in January to take up a government position back home in Libya.