"There is not enough evidence that he (Modric) committed the criminal offence of perjury," Kresimir Devcic told AFP.
In March, Croatian prosecutors had charged Modric, 33, with committing perjury during evidence he gave in the multi-million-euro corruption trial of former Dinamo Zagreb boss Zdravko Mamic.
He went on to join Real Madrid in 2012.
Mamic and three other defendants were found guilty of charges of abuse of power and corruption that cost Dinamo, the current Croatian champions, more than 15 million euros ($17.3 million), and the state 1.5 million euros.
Mamic, who is currently in hiding in neighbouring Bosnia, was sentenced in June to six and a half years in jail.
Prosecutors allege cash was embezzled through fictitious deals related to player transfers.
(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)