Reading his verdict, Efran Basyuning, the presiding judge of the South Jakarta District Court, said pictures of scantily dressed women could not, under criminal laws, "be categorised as pornography."
Hundreds of police armed with water canon were deployed outside the court in anticipation of any backlash from a crowd of protesters over the verdict.
"We will attack the Playboy office and sweep up copies of the magazine, which will destroy the morals of Indonesian children"
Islamic Defenders Front
Prosecutors had called for Arnada to be jailed in the case seen as pitting press freedom against conservative Islamic values in the world's most populous Muslim-majority nation.
The prosecution said Arnada had upset society and damaged Indonesia's morals.
But Arnada argued that Playboy Indonesia does not publish photographs of naked women or do anything to break Indonesia's indecency laws.
"This is a great gift for Playboy Indonesia because up
until today for one year my friends and I worked under
pressure," Arnada said at a press conference after the verdict was announced.
"Today's verdict proved press freedom is respected in this country."
Before the verdict he said the magazine would not be pulled from the shelves even if he ended up behind bars.
Playboy's debut issue in April last year featured several models on its cover and inside pages, showing cleavage and long legs - but nothing more explicit.
Many other magazines and websites carrying much racier content are widely available in the country.
|Arnada had faced more than two years|
in jail if found guilty [Reuters]
A lawyer representing a coalition of Muslim groups opposed to the magazine said they would refile the complaint not only against Playboy but against other adult magszines.
Earlier a group calling itself the Islamic Defenders Front (FPI) warned it would "declare war" against the adult magazine, which is still being published in Indonesia, if the court in Jakarta failed to jail Arnada.
"We will attack the Playboy office and sweep up copies of the magazine, which will destroy the morals of Indonesian children," Irwan Asidi, one of the Front's leaders, told the AFP news agency ahead of the court's ruling.
About 20 FPI members were allowed inside the courtroom itself as a panel of judges began reading the verdict.
"Playboy destroyed the mentality of the Indonesian generation. We have to fight against them. Islam not only protects Muslim followers but also non-Muslim," FPI member Abdul Khodir said.
Speaking before the verdict, Ina Rachman, Arnada's lawyer, said she hoped the court would rule objectively despite the protests.
"I hope the judges will take a decision independently and free from third-party influences," she told AFP.
"We all know that the FPI has threatened all parties, including the judges and myself."
Last year Playboy moved its Indonesian headquarters to the predominantly Hindu island of Bali after attacks on its offices in the capital, Jakarta.