Prosecutors notified website Netzpolitik.Org in late July that its founder, Markus Beckedahl, and fellow journalist Andre Meister were under investigation, touching off widespread criticism from free-speech advocates.
The website specialises in coverage of online privacy and digital culture.
Justice Minister Heiko Maas questioned the decision to open a treason probe, and last week fired chief federal prosecutor Harald Range after the two clashed over public allegations by Range of political interference, which the minister denied.
The federal prosecutor's office said it is closing the case because it believes the leaked documents the website's reports were based on were not a "state secret" and other conditions for treason charges also were not fulfilled.
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Beckedahl said the decision to drop the probe was not enough. "We want to know precisely whether we were subject to surveillance measures during the almost three-month investigation," he said in a statement.
Beckedahl added that he hopes the case will motivate authorities to improve protection for whistleblowers in Germany.
German officials have taken pains to stress their commitment to press freedom amid embarrassment over the probe.