Rimsha Masih, who could have faced life in prison if convicted of the charges, spent three weeks on remand in jail after being arrested on August 16.
She was released on bail in September but she and her family have been in hiding under government protection, fearful for their lives.
Although the decision to drop the case was welcomed, it is unlikely to pave the way for imminent reform of Pakistan’s blasphemy legislation, which activists say is too often used to settle personal disputes.
The prosecution said it would appeal the decision in the Supreme Court. In a 15-page judgment, Islamabad high court chief justice Iqbal Hameed ur Rahman threw out the case registered against Rimsha and urged Muslims to be “extraordinary careful” while levelling such allegations.
He said putting Rimsha on trial would have seen the courts “used as a tool for ulterior motive” and “to abuse the process of law”.
Blasphemy is an extremely sensitive issue in Pakistan and under the country’s penal code insulting the Prophet Mohammed can be punished by death. Even unproven allegations can provoke a violent public response.