Judge Manfred Seiss ruled there was insufficient evidence to find the defendants - including cable car company officials, technicians and government inspectors - responsible for conditions that allowed a faulty heater to cause the blaze on Nov. 11, 2000.
All 16 had pleaded not guilty. If convicted, they would have faced up to five years in prison.
"The law also has to protect those who are innocent," Seiss said in explaining his ruling. "In this case, we had to discover how far the defendants were personally responsible for what happened. We decided they weren't responsible."
Most victims were skiers and snowboarders from Austria and Germany. Eight were Americans, including a family of four and a newly engaged couple. Others were from Japan, Slovenia, the Netherlands and the Czech Republic. The youngest victim was a 6-year-old boy.
Only 12 people managed to escape the car as it turned into a fireball inside a tunnel on the side of the Kitzsteinhorn glacier near the popular Kaprun resort, 60 miles south of Salzburg.
The car was part of what is known as a funicular train that ascended the mountain on a track while being pulled by a steel cable.
Many of the victims could only be identified weeks later after analysis of their DNA.
"This is unbelievable - it simply can't be true," a relative of one of the victims told The Associated Press, refusing to give his name as he left the courthouse.
The prosecution alleged that officials from the company which ran the cable car, the manufacturers and installers of the heater and government officials who carried out safety inspections were responsible for allowing the inferno to happen by neglecting to check into what a simple fault could do.
Investigators say the blaze most likely started when a production-related defect in a space heater caused a heating element to come loose, causing hydraulic brake oil in nearby pipes to overheat, drip onto the plastic-coated floor and set it alight. Rubber and wood used in the construction of the carriage helped the blaze to spread.
The heater should never have been installed and should not have been so close to the hydraulic pipes, prosecutors said.
Lawyers representing the operating company said all safety regulations in effect at the time of the blaze were enforced. They contended the company could not be held responsible for safety defects that only became apparent after the investigation into the fire.
Separate civil trials are under way in New York and in Germany, where lawyers for American and German victims are seeking billions of dollars in compensation. The operating company has refused to deal with compensation claims until verdicts were issued in the criminal case.
Before the verdicts were announced, a relative of one of the victims staged a one-man protest in front of the court. He carried a banner with the names of all 155 victims and the words: "Who will take responsibility for these 155 lives?"
"I want to tell the relatives of the victims that the memory of this tragedy will accompany me until the end of my life," one of the defendants, Guenter Theuys, said before the judge read out the verdicts.
Investigators had testified that the driver was unable to open the doors as the fire spread. When he did open the doors, many of those who tried to escape upward through the tunnel were killed by toxic fumes from the blazing car, they said.
The trial had lasted more than 18 months.
By Karl Peter Kirk