Abdallah Higazy, the 30-year-old son of an Egyptian diplomat, had been accused of interfering with the investigation into the Sept. 11 terrorist attack, which demolished the 110-story twin towers. He had been in custody for a month.
Authorities had said they found the aviation radio in his room at the Millennium Hilton Hotel with a view of the trade center.
But charges were dismissed on Wednesday after another hotel guest, who is a private pilot, told officials on Monday the radio belonged to him, said Marvin Smilon, a spokesman for the U.S. attorney's office.
"The FBI has verified that the aviation radio found in Mr. Higazy's room belongs to this other man," read a two-page document filed late Wednesday by prosecutors.
The radio, called a transceiver, is marketed for use by pilots, enabling them to communicate air-to-air and air-to-ground with other pilots or to monitor other pilot conversations.
Higazy had insisted he knew nothing of the hand-held radio. The pilot was also a guest there.
The FBI had initially said a hotel employee found the radio in a safe in Higazy's room along with his Egyptian passport, a copy of the Quran and a gold medallion.
But according to the document filed Wednesday by prosecutors, the employee later said he found the radio on a table in Higazy's room on the 51st floor.
Prosecutors said it was unclear how the radio may have gotten to Higazy's room from the 50th floor, where the pilot was staying, but a number of people had been in the room between Sept. 11 and when the radio was found. There had been no contact between the two hotel guests, prosecutors said.
Smilon said prosecutors asked that the charges against Higazy be dismissed after the pilot went to claim his belongings Monday, three days after Higazy was charged.
A judge approved the dismissal Wednesday, and Higazy was released Wednesday night, Herbert Hadad, another spokesman for the U.S. attorney's office, said Thursday morning.
The charges were dismissed without prejudice and can be filed again later, Smilon said.
The hotel was evacuated Sept. 11. Higazy was arrested Dec. 17 after he returned to the still-closed hotel to retrieve his possessions. He denied ever seeing the radio.
Higazy's lawyer, Robert S. Dunn, was unavailable for comment Thursday morning, but he was expected to hold an early afternoon news conference with his client to discuss the case.
Dunn has said his client was a victim of circumstance in a case based on circumstantial evidence and that Higazy begged for a lie detector test to prove his innocence.
"We're quite suspicious right now of anyone of Arab descent and anyone who can be remotely linked to 9-11," Dunn has said.
Higazy's name had not surfaced publicl in the investigation before he was charged. The criminal complaint against him drew no direct connection between him and the hijackers, who included some Egyptians.
Higazy was enrolled at Polytechnic University in Brooklyn last September as a graduate student in computer engineering, the school said.
Authorities said a student aid group in Washington directed Higazy to stay at the hotel until he could find more permanent housing. He checked into the hotel Aug. 27 and was scheduled to check out Sept. 25.
By Michael Weissenstein © MMII The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed