The case led to Terry being stripped of the England captaincy by the Football Association ahead of the European Championship and the departure of coach Fabio Capello who disagreed with the decision.
But after hearing four days of evidence at a London court, chief magistrate Howard Riddle found he was not convinced that Terry had committed a racially aggravated public order offence in a confrontation with Queens Park Rangers player Anton Ferdinand during the match in October.
The England and Chelsea defender was acquitted of calling Ferdinand a “fucking black c**t” during a Premier League game at QPR on Oct 23 last year.
Terry jerked his head downwards as the verdict was given, and his relatives in the public gallery cheered.
Terry, wearing a white shirt with a grey suit and tie, left court without speaking to media or supporters waiting outside.
Terry’s legal team said in a statement: “He did not racially abuse Mr Ferdinand and the court has accepted this.”
Terry maintained he only used an offensive term sarcastically to counter the obscenity he claims Ferdinand was accusing him of using.
It followed Ferdinand goading Terry about an alleged extramarital affair with then-England teammate Wayne Bridge’s former girlfriend.
And Riddle was persuaded by the defence claim that Terry could have misheard “Bridge” as “black,” prompting his belief that a claim of racism was being wrongly claimed.
“It is highly unlikely that Mr Ferdinand accused Mr Terry on the pitch of calling him a black c**t,” Riddle wrote in his judgement. “However I accept that it is possible that Mr Terry believed at the time, and believes now, that such an accusation was made.
“The prosecution evidence as to what was said by Mr Ferdinand at this point is not strong. Mr (Ashley) Cole (the Chelsea defender) gives corroborating (although far from compelling corroborating) evidence on this point. It is therefore possible that what he said was not intended as an insult, but rather as a challenge to what he believed had been said to him.”
There were cheers in Court One at Westminster Magistrates’ Court from members of Terry’s family after the verdict.
“We are pleased that John can now put his mind to football and go back to training and do what he’s done for many years,” Chelsea chairman Bruce Buck said outside Westminster Magistrates’ Court.
Riddle said there was no evidence Terry has lied and called him a “credible witness”.
“The lip readers do not provide evidence that categorically contradicts his account,” he said of the incident that spread on YouTube after the game. “What may at first sight have seemed clear to the non-expert, is less clear now. There are limitations to lip reading, even by an expert. I have assessed John Terry as a credible witness.”
Ferdinand, who was not present in court for the verdict, had been reluctant to pursue a criminal case, which was prompted by an off-duty police officer making the complaint.
Prosecutors accepted the verdict, but defended the decision to take action.
“The very serious allegation at the heart of this case was one of racial abuse,” Alison Saunders, chief crown prosecutor for London, said. “It was our view that this was not ‘banter’ on the football pitch and the allegation should be judged by a court.
“The chief magistrate agreed that Mr Terry had a case to answer, but having heard all of the evidence he acquitted Mr Terry ofa racially aggravated offence.”
Terry had faced a maximum fine of £2,500 if found guilty in a case that was heard without a jury Leaving court, Ferdinand’s parents, Julian Ferdinand and Janice Lavender, who attended every day of the trial, declined to comment.
Ferdinand said: “I have nothing to say to you at all.”