Ahmed Belbacha, 45, was acquitted by the court in the capital Algiers for lack of proof, Amine Sidhoum told AFP.
The prosecution had sought a prison term of 12 years.
Belbacha had been sentenced in absentia in November 2009 on the same charge, with an Algerian court ordering him to serve 20 years for "membership of a terrorist group active abroad".
In March, the Pentagon said it had repatriated Belbacha after holding him without trial at Guantanamo naval base for more than a decade.
The documents alleged he was a veteran of the Algerian military who later attended the Finsbury Park mosque in London, then known as a centre of hardline Islamism.
In early 2001, Belbacha went to Afghanistan, where he received weapons training at a militant camp.
When the US-led invasion began after the September 11 attacks, he fled to Pakistan where he was later captured and turned over to the United States.
Belbacha had asked a US court in 2007 to bar the American authorities from returning him to Algeria, saying he feared he would face abuse by the government there.
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