Qari Hashim was arrested in 2005 in connection with the kidnapping and murder case that made global headlines.
He was freed of the charges by an anti-terrorism court (ATC) in Hyderabad in southern province of Sindh in a trial held inside a jail.
Hashim's counsel Sher Mohammad Leghari had filed an acquittal plea on the basis of lack of evidence.
Leghari also said that another accused Mubarak Gilani arrested with Hashim was already set free due to lack of evidence.
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The ATC has awarded death sentence to Omar Shaikh and life imprisonment to the co-accused.
Pearl, the South Asia bureau chief at the Wall Street Journal, was kidnapped by al-Qaeda linked militants in January 2002 in Karachi and a month later government announced he had been killed after receiving a video tape showing his beheading.
His decapitated body was recovered from a grave in May 2002.