The news, which was broken by Pamuk's lawyer Haluk Inanici but which has yet to be officially confirmed, was quickly welcomed by the European Union.
A spokesman for EU Enlargement Commissioner Olli Rehn said the ruling "is obviously good news for Mr. Pamuk but it's also good news for freedom of expression in Turkey."
Good news for Pamuk, indeed.
The best-selling author had faced up to three years in jail over remarks he made, nearly a year ago, about the World War I-era killings of Armenians and the more recent deaths of thousands of Kurds.
In the past century, he'd said, "a million Armenians and 30,000 Kurds were killed in these lands," but few dare to talk about it.
The comments touched a nerve in Turkey, which has rejected any attempt to label the killings of Armenians in the last years of the Ottoman Empire as "genocide."
And there were noisy scenes at Pamuk's first appearance in court in December, when his car was pelted with eggs as angry nationalists shouted "Traitor!"
Today's decision is also good news for Turkey. Pamuk's case had drawn international criticism, particularly from the EU, which Turkey hopes one day to join.
But while the EU and others have welcomed today's move, some point to the dozens of others who face similar charges in Turkey.
"We are absolutely delighted but we're also concerned that there still remain a number of other writers and journalists who are on trial at the moment for similar offenses," said Sara Whyatt, who works in the London office of International PEN, which campaigns for writers' freedom of expression worldwide. "Even though the trials might end in suspension [suspended sentences] we have to see the end of laws such as Article 301 [under which Pamuk was changed], such as the articles which can bring journalists to court for criticizing court decisions, we have to see an end to that before we can really say that there is true freedom of expression in Turkey."
Pamuk's case was dropped on a technicality.
The court had adjourned his trial in December to ask the justice ministry whether it should proceed.
The justice minister, Cemil Cicek, responded last week, saying the decision was not his to make.
So the court said the case could not go ahead.
Freedom of speech campaigners say they hope other cases, too, will have a similarly positive ending.