Babis was charged for helping take his Stork Nest farm south of Prague out of his giant Agrofert food, chemicals and media holding to make it eligible for a $2-million European Union subsidy for small companies.
"The deed described in the indictment is not a crime," Judge Jan Sott said after delivering the verdict.
The 68-year-old Babis, who served as prime minister from 2017 to 2021, has denied any wrongdoing, calling the trial "a political process" ahead of the presidential election starting on Friday.
Alongside former high-ranking NATO general Petr Pavel and economist Danuse Nerudova, Babis is one of three odds-on favourites to reach a second-round run-off scheduled for the end of January.
Babis, a Slovak-born populist and the fifth wealthiest Czech according to Forbes magazine, was charged alongside his former aide Jana Nagyova, who was also acquitted.
Neither of the two showed up in court on Monday morning.
Babis is chairman of the opposition ANO, a centrist populist movement which narrowly lost a general election in 2021 to a three-party centre-right coalition led by the current premier, Petr Fiala.
ANO still tops opinion polls, scoring around 30-percent support.
Babis, who is also facing accusations that he served as a Communist secret police agent in the 1980s, currently sits as a lawmaker.
He was charged by police in 2017 and indicted in March 2022 after parliament had stripped him of his immunity.
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