Obara, allegedly a regular at bars in Tokyo where foreign women pour
drinks for clients, was arrested in 2001 on charges of drugging and raping Blackman but not murder.
Instead, he faced a lesser charge of "rape leading to death".
"The court cannot prove that he single-handedly was involved in her [Blackman's] death"
"The court cannot prove that he single-handedly was involved in her [Blackman's] death," presiding judge Tsutomu Tochigi said on Tuesday.
"What is clear is that the victim was together with the accused and then vanished and next was found dead."
Obara denied all the charges, and his lawyer, Yasuo Shionoya, said he was likely to appeal against the verdict.
Blackman, a former British Airways flight attendant who was 21 at the time, disappeared in July 2000 while working as a hostess in Tokyo.
Prosecutors say Obara gave Blackman a fatal drug overdose in June 2000 before dismembering her body.
Police found her remains, including a severed head encased in concrete, seven months later in a cave by the sea 250 metres from Obara's condominium.
Experts say the verdict in Japan's worst sex crime case is likely to cause outrage in Britain, where Blackman's disappearance and death attracted huge attention due to her family's search campaign, and the gravity of the charges.
"My goal is to have sex with 500 women by the time I am 30"
In handing down the ruling, the judge referred to evidence submitted by prosecutors including a diary kept by Obara, video tapes showing him raping women, and writings in which he said his "goal is to have sex with 500 women by the time I am 30".
In September, Blackman's father, Tim, accepted an $840,000 "condolence payment" paid by a friend of Obara, saying he would donate a substantial amount of it to a charity set up in his daughter's name.
But his former wife, Lucie's mother, criticised him, saying the action could affect the sentencing.