The long-running case, fuelled by accusations of police incompetence, has received enormous media and public attention in South Korea.
"Indirect, circumstantial evidence is insufficient to support the charge that the accused killed the woman by suffocating her", the court said in a statement, upholding an April ruling by an appeals court.
The man, identified only as Mr. Kim, checked into a motel in Incheon City near Seoul with his girlfriend in April 2010 after buying two live octopuses from a local restaurant.
Police initially saw the case as an accident and closed the file.
More From This Section
But they were forced to reopen the case five months later after a TV programme highlighted efforts by Yoon's father to have Kim investigated, after discovering his daughter had taken out a life insurance policy just before she died.
The boyfriend was the sole policy beneficiary and collected 200 million won ( USD 1,90,000).
Kim was subsequently convicted of murder in October and sentenced to life imprisonment by a court that cited, "compelling indirect evidence" that he suffocated Yoon for the insurance money.
Live octopus is a delicacy in South Korea but is a known choking hazard, since the still-moving suction cups can cause tentacle pieces to stick in a person's throat.
A baby octopus is often consumed whole, while larger varieties are cut up and the still-wriggling tentacles eaten with a splash of sesame oil.
A tentacle was found in Yoon's throat and both her family and police had initially accepted Kim's story that she accidentally choked to death.