The US justice department has said it will ask a judge to overturn the conviction of Ted Stevens, the former Alaska senator, after a review found prosecutors withheld information.
Stevens was convicted last October on seven counts of lying on a senate disclosure form to hide $250,000 in gifts and home renovations from an oil executive and friends.
The Republican party's longest serving senator, he lost his senate seat following the elections on November 4.
Eric Holder, the US attorney-general, said in a statement on Wednesday that it was in the "interests of justice" to dismiss the case and not seek a retrial for Stevens, who had been awaiting sentencing.
"I always knew that there would be a day when the cloud that surrounded
me would be removed,'' Stevens said in a statement.
"That day has finally come. It is unfortunate that an election was affected by proceedings now recognised as unfair.''
The prosecutors who handled the trial have been removed from the case and their conduct is under investigation.
A hearing on the justice department's request has been set for April 7.
The trial was beset by government errors, with the judge at one point holding three Justice Department lawyers in contempt for failing to turn documents over to Stevens' legal team.
In court documents, the department admitted it had not turned over notes from an interview with the oil executive, who estimated the value of the renovation performed on Stevens' home as far less than he testified at trial.
Holder said the department's office of professional responsibility, a unit that investigates allegations of prosecutorial misconduct, will review the case.
Stevens was a ranking member of the Senate Appropriations Committee and known for his ability to bring federal funding to Alaska, a sparsely populated state.
In a statement, his lawyers criticised what they described as a "tainted verdict" based on "false evidence".
"This case is a sad story and a warning to everyone. Any citizen can be convicted if prosecutors are hell-bent on ignoring the [US] constitution and willing to present false evidence," Brendan Sullivan and Robert Cary said in a statement quoted by AP.