Last August, the swimmer was charged with filing a false police report over a gas station encounter during the Olympics.
Lochte had said that he and three other USA swimmers, Jimmy Feigen, Gunnar Bentz and Jack Conger, were on their way back to the Olympic Village from a party when their auto was pulled over by gun-toting robbers pretending to be police officers.
Initially, Lochte was ruled to have broken the law by means of a 2-1 vote in the Brazilian court, but on Thursday, the decision was reversed by a new 2-1 count.
Lochte still stands against the city of Rio de Janeiro with two other charges.
Surveillance video shows Ryan Lochte, Gunnar Bentz, Jack Conger and Jimmy Feigen at a gas station in Rio de Janeiro, where they claimed they were robbed by armed men posing as cops. The three-judge panel, in a 2-1 ruling, noted that Rio police, not Lochte, had initiated the investigation and that the story he first told NBC did not meet the standard of a false report.More news: Human remains found in search for missing men, 1 victim ID'd
Lochte had previously earned a 10-month suspension from the national swim team, a penalty that has concluded as of July 1, allowing him to return to action. Ostrow said the prosecution has 15 days to appeal again.
Lochte's suspension, which ended on June 30, meant he couldn't compete in the United States championships that were the selection meet for the upcoming World Championships in Budapest.
Since the incident, the athlete got engaged to model Kayla Rae Reid in October 2016, and they had their first child Caiden Zane Lochte in June of this year.
An investigation by USA Today Sports found Lochte had exaggerated the incident, but the base of his story was true.
He plans to compete in the 2020 Olympics.