Desmond Ricks' lawyers say homicide detectives switched bullets in his mother's gun to pin a shooting on him.
He was convicted of gunning down a friend outside a restaurant in Detroit, Michigan, in March 1992, and sentenced to at least 32 years in prison.
Mr Ricks, 51, was released from prison last Friday.
On Thursday, Wayne County prosecutor's office said Mr Ricks would not face a second trial.
"I hope you enjoy your newfound freedom," Judge Richard Skutt told the exonerated man, who heaved a sigh of relief.
Mr Ricks' case was championed by lawyers and students from the Innocence Clinic at the University of Michigan's law school.
They managed to get the investigation reopened in 2016 after pointing out that two bullets taken from the victim, Gerry Bennett, looked different from the rounds presented at trial.
Police investigators had maintained the bullets held up as key evidence were fired from Mr Ricks' mother's pistol.
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But a state police report last month established the bullets from the victim did not match the 38-calibre gun that belonged to Mr Ricks' mother.
"I've got no time to be bitter at anybody," Mr Ricks said outside Wayne Circuit Court after Thursday's hearing, reports the Detroit News.
"There's no excuse for what they did, but I have to move on. I just didn't want to die in prison.
"Now, I'm just trying to get some semblance of my life back. I just want to pay my taxes and be a good citizen."
Mr Ricks is expected to be compensated thanks to a new Michigan law that awards wrongly convicted prisoners $50,000 (Â£38,800) for each year spent in prison, which would make him eligible for $1.25m.
David Moran, director of the Innocence Clinic, said the police conduct was criminal, but no retired officers can be brought to justice because too much time has passed.
"If it happened once it would be very surprising if there's not a lot of other cases like it," he said.
The Detroit police gun laboratory that handled the case was shut down in 2008 because of errors in ballistic testing.

The fact that the government is no longer even the biggest shareholder marks an important return to near normality.
Since 2013, the government stake has been sold off at first in a couple of big chunks and then in a gradual trickle and so this moment was bound to happen at some stage.
The government still owns nearly 6%, but global investor Blackrock now eclipses that and Lloyds is on trajectory to return to full private ownership later this year when taxpayers should recoup all the money they put in.
It hasn't been an easy ride.  The huge compensation costs of PPI mis-selling and intermittent market turbulence have hampered and delayed the process, but Lloyds, while not risk-free, can be considered pretty much out of the woods.
As a plain vanilla UK savings and lending bank, Lloyds was always going to be an easier bank to fix than RBS which is still about 71% owned by the taxpayer.
As a global bank with fingers in most of the pies that got burnt during the crisis, RBS has paid out over Â£50bn in fines and compensation and has its biggest reckoning yet to come.
It is still facing a bill from US authorities which could end up in the double digit billions for its role in the subprime mis-selling scandal that started the whole financial crisis in the first place.
While those negotiations could come to a head as early as this week (watch out for separate blog on this), RBS won't reach the point Lloyds did today for many, many years to come.
US prosecutors have dropped all charges against a man who spent 25 years in prison for murder, amid allegations police had falsified evidence.
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Eight years ago the government rescued Lloyds by taking a 43% stake for just over Â£20bn.