Jamie Fawcett, 46, was charged in January 2005 with possessing and using a listening device after he allegedly was spotted planting the bug near a sidewalk outside Kidman's Sydney home.
The New South Wales state Department of Public Prosecutions withdrew all charges against Fawcett in Sydney's Local Court on Thursday. The reasons for the decision were not immediately clear.
"I'm naturally happy," Fawcett told the Australian Broadcasting Corp. outside the court. "I didn't think that ... there was any reason to bring the charges in the first place."
Kidman's Australian agent, Wendy Day, said it was a matter for prosecutors and the actress had no comment.
Photos: Nicole Kidman
"It has nothing to do with Nicole," she told The Associated Press. "That was something to do between the DPP and Jamie Fawcett."
Not long after he was charged, a Sydney court ordered Fawcett to provide a DNA sample to compare with samples allegedly found on the listening device.
But the photographer appealed to the New South Wales state Supreme Court, which ruled that he could not be forced to provide police with a DNA sample since there was no evidence he had violated any law.
In 2005, Kidman reached an out-of-court settlement with Fawcett and fellow Sydney-based photographer Ben McDonald after she was granted a temporary restraining order against the pair.