"It offends my sense of justice ... The court has determined that enough is enough and brought this misplaced prosecution to conclusion," U.S. District Court Judge David Sam said.
He told jurors the government had not presented sufficient evidence during five weeks of testimony to prove its case against Tom Welch and Dave Johnson, and wondered aloud how much taxpayer money had been spent on the prosecution.
In Washington, assistant U.S. Attorney General Christopher Wray expressed disappointment at the ruling.
"The government believes that the Olympics bribery case was an important one to bring to uphold the rule of law, and we continue to believe that the citizens of the United States, especially the people of the state of Utah, had the right to have this criminal case decided by a jury," Wray said.
He added that the judge's actions left the government with no avenue of appeal.
The judge considered the prosecution's case so weak he granted a defense motion to dismiss the charges.
Outside the courtroom, juror Brandon Oyler, 22, said he agreed with the judge. "There was no proper evidence," Oyler of Tremonton, Utah, said. He added that the defendants "should have been honored" for their work on the Olympic Games.
The judge agreed. Speaking directly to Welch and Johnson he was sorry the two -- who were first charged in 2000 -- had not been able to enjoy the Olympics when they were staged in February 2002.
He praised their "tireless efforts to bring the Olympics to our great state".
Welch and Johnson smiled but were otherwise quiet in court after the case was dismissed. Johnson broke into tears outside the courthouse.
The two had been charged by the U.S. Justice Department with masterminding a $1 million cash-for-votes scheme to entice international Olympic dignitaries to choose Salt Lake City over other bid cities to host the games.
The two executives, who were lauded when Utah was chosen in 1995 to host the 2002 Winter Games, had pleaded not guilty to all the charges.
In 2001, Judge Sam dismissed the charges, but earlier this year a federal appeals court in Denver reinstated them.
Outside court, Johnson told reporters that the three-year ordeal had been "horrid".
"I think it's a tragedy that our government can do this and they were out of line," he said.
Welch said he hoped some good could come from the scandal and ensuing investigation. "Our system is a great system and it works," Welch said. "Maybe the struggle of having the Olympics, even the scandal, will make us a kinder, more gentle people ... Then what we have been through is worth it."
If convicted on all counts the men could have gone to prison for up to 75 years.
Welch and Johnson have said all along that other Olympic officials knew what they were doing to entice International Olympic Committee delegates to chose Utah. Their attorneys told jurors that the two men were scapegoats. Utah had tried for three decades to win the right to stage the Olympics.
Changes were made at the Swiss-based IOC after the embarrassing scandal broke and rules were tightened up for how cities can bid to host the Games.
(Additional reporting by Deborah Charles in Washington)