"The defendant is acquitted," presiding judge Enrico Tranfa said, requesting silence after gasps from the court.
The judge said there was "no crime" on the abuse of power charge and that Berlusconi's actions "did not constitute a crime" on the prostitution one, promising to publish a detailed explanation within the three-month legal limit.
Berlusconi's lawyer Franco Coppi said that the ruling had "exceeded our highest expectations", explaining that the judge may have recognised the defence argument that Berlusconi did not know the girl was 17 years old.
The 77-year-old billionaire tycoon left the centre at Cesano Boscone near Milan following the ruling without making any comments, while a lone supporter held up a sign reading: "Justice is served".
Prosecutors had asked the judges to uphold the seven-year sentence for having sex for money with an exotic dancer called Karima El-Mahroug, who is now better known by her stage name as "Ruby the Heart Stealer".
Prosecutors, who had relied on telephone wiretaps and statements made and then denied by El-Mahroug, could now apply to the supreme court to review the ruling.
The ruling will have political repercussions, providing a respite from the legal storm around Berlusconi.
Ahead of the verdict, his Forza Italia party had been riven with internal divisions since a ruling against him would have opened the possibility of the ageing playboy being excluded from the political scene entirely.
Berlusconi is also currently on trial for allegedly bribing a senator with 3.0 million euros (USD 4.0 million) in 2006 to join his party and destabilise a centre-left government.
You’ve hit your limit of {{free_limit}} free articles this month.
Subscribe now for unlimited access.
Already subscribed? Log in
Subscribe to read the full story →
Smart Quarterly
₹900
3 Months
₹300/Month
Smart Essential
₹2,700
1 Year
₹225/Month
Super Saver
₹3,900
2 Years
₹162/Month
Renews automatically, cancel anytime
Here’s what’s included in our digital subscription plans
Access to Exclusive Premium Stories Online
Over 30 behind the paywall stories daily, handpicked by our editors for subscribers


Complimentary Access to The New York Times
News, Games, Cooking, Audio, Wirecutter & The Athletic
Business Standard Epaper
Digital replica of our daily newspaper — with options to read, save, and share


Curated Newsletters
Insights on markets, finance, politics, tech, and more delivered to your inbox
Market Analysis & Investment Insights
In-depth market analysis & insights with access to The Smart Investor


Archives
Repository of articles and publications dating back to 1997
Ad-free Reading
Uninterrupted reading experience with no advertisements


Seamless Access Across All Devices
Access Business Standard across devices — mobile, tablet, or PC, via web or app