French comic Dieudonne was acquitted on charges related to a video in which he calls for the release of a self-styled Islamist serving life for the kidnap and murder of a Jewish phone salesman.
The controversial performer, who has a string of convictions for anti-Semitic hate speech, was cleared of defamation and illegally defending a convicted criminal on Friday because the judge ruled that it had not been proven that Dieudonne was behind the distribution of the video, AFP news agency reported on Friday.
As a result, the court could not consider the content of his remarks, the judge added in a ruling greeted with dismay by France's Union of Jewish Students (UEJF), which had initiated the case.
UEJF lawyer Stephane Lilti said he would appeal in the hope of persuading another judge to "punish this recidivist anti-Semitic militant as he deserves".
"The judicial system has done democracy a disservice today," he added.
Dieudonne's lawyer, Francois Danglehant, welcomed the decision. "For once, the court has applied the law correctly," he said.
In the video, Dieudonne complains about the "power of the Jewish lobby" and calls for the release of Youssouf Fofana, currently serving a life sentence for the 2006 kidnapping and murder of Ilan Halimi, a 23-year-old of mixed French-Moroccan-Jewish heritage.
Fofana, a self-styled "barbarian" from the Ivory Coast, was convicted in 2009 of being the ringleader of a gang that abducted Halimi in the Paris suburbs three years earlier.
After failing to extract a ransom, the gang released their captive after 24 days.
Halimi, who was found naked and handcuffed to a tree, died on his way to hospital and the trial heard that he had been repeatedly tortured during his detention.
French authorities are currently trying to force Dieudonne to pay more than $90,000 in outstanding fines for race-hate convictions.
They are also investigating the comic for suspected money laundering and misuse of corporate assets in a crackdown that has intensified since the government decided to ban him from touring his latest show.
Dieudonne was also banned from entering Britain earlier this week after authorities there declared him a threat to public order because of the racist nature of his act.
Dieudonne has long enjoyed cult popularity in France but he has been catapulted to another level of fame in recent months by the popularity of his "quenelle", a stiff-armed pose that he defends as an anti-establishment gesture but critics see as a disguised Nazi salute.
Former France international footballer Nicolas Anelka is currently awaiting the outcome of disciplinary proceedings against him after he performed a quenelle goal celebration for his English club, West Brom, last month.
The UEJF is also seeking a court order for Dieudonne to withdraw one of his videos from YouTube and a ruling on that is due on Wednesday.
The students organisation hope that a ruling in their favour will enable them to press YouTube to take down all of Dieudonne's videos.