The court decision means the Christian mother-of-five will be free to leave the country.
The three-judge Supreme Court panel had "insisted on very strict proofs of blasphemy" and found none, said Saif ul-Malook, Asia Bibi's laywer, who returned to the country yesterday, having fled Pakistan last year due to being "inundated with threats".
Chief Justice Asif Saeed Khosar said in court on Tuesday: "Based on merit, this petition is dismissed".
He said that Ms Bibi's accusers were guilty of perjury and if the case had not been so sensitive, they should have been jailed for life.
"The image of Islam we are showing to the world gives me much grief and sorrow," Mr Khosa added.
Dr John Newton from Aid to the Church in Need told Premier: "We're absolutely delighted. We know the family has been hoping and praying that this is the result that was going to happen.
"This means that her future is no longer uncertain. This means she is now officially a free woman, as she thought she was at the end of last year.
"So, God willing, she will now be able to move forward - hopefully, an offer of asylum will come in that she's able to accept and she's able to start living a free future as a free woman."
Ms Bibi heard the news over the TV and a friend quoted her as saying: "I am really gratefully to everybody, now after nine years it is confirmed that I am free and I will be going to hug my daughters."
Ms Bibi spent eight years on death row after being convicted in 2010 of insulting the Islamic prophet Mohammad and sentenced to death.
She was acquitted in October but wasn't permitted to leave the country.
Many hard-line Islamists, led mainly by the radical Tehreek-e-Labbaik party, wanted the sentence upheld and wanted her publicly executed so started a petition to appeal against the acquittal.
Christian Solidarity Worldwide responded to her freedom on twitter: "We continue to call on the government of #Pakistan to ensure the safety of Asia Bibi, her family, the Christian community and all involved in her case following, and to implement much-needed procedural amendments to prevent further misuse of the country's blasphemy laws."
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