Hicks was held in the notorious US-run prison from January 2002 until May 2007, when he pleaded guilty to providing material support to Al-Qaeda.
The plea bargain suspended all but nine months of his seven-year sentence and allowed him to return home. He has since recanted his confession, claiming he only admitted guilt under duress.
Hicks claims he was beaten, sexually abused and drugged while in jail.
"We had been waiting for this decision for years. It is a relief because it is over," Hicks said in Sydney.
"I am sure no one is surprised by today's long-awaited acknowledgement by the government of the United States of America of my innocence. Even the Australian government has admitted that I committed no crime.
"It is just unfortunate that because of politics, I was subjected to five-and-a-half years of physical and psychological torture that I will now live with always."
He has admitted to taking part in paramilitary training in Afghanistan and Pakistan, as well as conflicts in Kosovo and Kashmir but maintains he never had extremist intentions.
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