In a statement released before a court hearing Monday, Prosecutor Theodore J. Romankow said he decided not to pursue the charges following "careful re-evaluation of the case" against Byron Halsey.
Halsey, 46, was released from prison on May 15 after a judge threw out his convictions. New DNA testing, not available when he was convicted, linked a neighbor to the crime.
However, until Monday, Halsey could have been retried on charges of aggravated sexual assault, aggravated manslaughter, felony murder, child abuse and possession of a weapon for an unlawful purpose.
Instead, on the prosecutor's recommendation, a judge dropped all charges.
Outside the courtroom, Halsey thanked prosecutors for "acknowledging the truth."
"I want to thank my Lord savior for carrying me through the years," said Halsey, who also thanked his grandmother, standing behind him in a crowd of supporters.
Halsey said he is trying absorb his new freedom, which began Monday with the removal of an electronic ankle bracelet that monitored his whereabouts.
Though he said he is still angry, he doesn't have immediate plans to sue the state.
Halsey had been convicted in 1988 of murdering and sexually assaulting Tyrone and Tina Urquhart, the children of his girlfriend, with whom he lived at a Plainfield rooming house.
For the last month and a half, he has been trying to piece his life back together without knowing if he would still face charges.
He moved to Newark and found a job with a sign company, established himself with a church and met with social workers to help him adjust to his new life since the dramatic day in May when he walked out of prison.
He said he's gained 20 pounds since leaving prison and has enjoyed catching up with his family. "I'm going to church, going to work, pay my bills," he said, proudly handing out his business cards to reporters.
When asked what the biggest change was since he went into prison in 1985, he said, "Cell phone, man."
The next step would likely be applying for compensation and filing a civil lawsuit, said Barry Scheck, co-director of the Innocence Project, which is representing Halsey.
Vanessa Potkin, a lawyer with the group, said he could be compensated $20,000 per year of imprisonment.
Superior Court Judge Stuart L. Peim vacated Halsey's conviction on May 15 and granted a new trial because the new evidence "would probably change the verdict."
The bodies of Tyrone, 8, and Tina, 7, were found in the home's basement in November 1985.
Halsey had made a confession before trial, but Scheck said the statement followed 30 hours of interrogation over a 40-hour period.
At trial, the jury opted for life in prison rather than the death sentence, prompting jeering in the courtroom, said Eric Ferrero, a spokesman for the Innocence Project.
Halsey was sentenced to two life terms, plus 20 years.
The new DNA test showed that a neighbor in the rooming house, Clifton Hall, 49, was the source of semen recovered at the scene and may have been responsible for the crimes, Ferrero said.
Hall has now been charged with two counts of murder and one count of aggravated sexual assault, authorities said. He is being held at a prison for sex offenders because of three sex crimes convictions in the 1990s.
Halsey is the 205th person nationwide exonerated and the fifth in New Jersey through DNA evidence, said Ferrero of the Innocence Project, which is affiliated with Cardozo School of Law at Yeshiva University.