The case against Lance Cpl. Stephen Tatum, 26, of Edmond, Okla., was dropped as jury selection was about to begin for his court-martial.
The government has been seeking Tatum's testimony against the squad leader, Staff Sgt. Frank Wuterich of Meriden, Conn.
In February, Tatum received an order to testify against Wuterich and an unrequested immunity order that said anything to which he testified would not be used against him in his court-martial. On Friday, a new immunity order was issued along with the dismissal of charges.
In addition to two counts of involuntary manslaughter, Tatum had been charged with reckless endangerment and aggravated assault.
Tatum's attorney, Jack Zimmerman, said there was no agreement with the government before the dismissal.
"Absolutely, there is no deal," he said.
Zimmerman said Tatum would testify if called as a witness in future trials but that he would testify as a neutral witness, not a government witness.
Camp Pendleton spokesman Lt. Col. Sean Gibson said the dismissal was signed by Lt. Gen. Samuel Helland.
The case stemmed from a squad's assault in response to a roadside bombing of a convoy that killed one Marine and wounded two others.
The government says Wuterich and another Marine shot five men at the scene and the squad leader then ordered his men to clear homes with grenades and gunfire, killing unarmed civilians.
Wuterich faces nine counts of voluntary manslaughter, aggravated assault, reckless endangerment and obstruction of justice. There is no date set for Wuterich's court-martial.
Wuterich's civilian defense attorney, Neal Puckett, contended that the Tatum dismissal showed the government has a poor case against his client.
"I think it's a further demonstration of how weak the government's case has become. Of the four Marines who fired weapons that day only one still faces charges," Puckett said.
Four enlisted Marines were initially charged with murder and four officers were charged with failing to investigate the deaths. Over time the case has shrunk, including removal of all murder charges.
Tatum was the third enlisted Marine to have all charged dismissed. Only two officers remain charged.
The highest-ranking defendant is Lt. Col. Jeffrey R. Chessani of Rangley, Colo., commander of the Camp Pendleton-based 3rd Battalion, 1st Marine Regiment at the time of the Nov. 19, 2005, Haditha killings.
Chessani, accused of dereliction of duty and violation of a lawful order, has said he didn't order a formal investigation because he believed the deaths resulted from lawful combat.