Grayson, an intelligence officer, was not present when the Iraqis were shot dead by US marines on November 19, 2005, shortly after a roadside bomb killed a US soldier nearby.

Defence lawyers had said prosecutors bungled the investigation into the killings under intense media scrutiny.

Roadside bomb

Grayson, who served two tours of duty in Iraq, could have faced up to 20 years in prison if he had been convicted.

Two other marines, including sergeant Frank Wuterich, the alleged ring leader of the group, still face courts-martial over the events at Haditha which brought international condemnation.

Wuterich faces trial later this year.

Grayson was the first to go on trial of eight soldiers and officers initially charged with crimes in connection with the incident.

Six of the eight men have had charges against them dropped, while charges of murder against Wuterich were replaced by the lesser offence of manslaughter.

Shortly after the  killings in Haditha, the marines released a press release saying 15 Iraqis had been killed by the roadside bomb that claimed the life of US lance corporal Miguel Terrazas.

Following an investigation by Time, the US magazine reported most of those who died were killed as marines swept through homes near the site of the bombing.

The report led to a wide-ranging military investigation.

Source: Agencies