The officer, 2nd Lt Erick Anderson, 26, was charged in 2004 after two soldiers under his command alleged he gave permission to kill Iraqi civilians.

One has since refused to testify and the other has changed his story.

The charges against Lt Anderson were brought after four platoon members were convicted of killing Iraqis in the Sadr City area of Baghdad.

Investigating officers said that all charges against Lt Anderson had been dismissed and no further inquiries would be carried out.

"Today's a pretty good day," Lt Anderson told the Associated Press.

"Right now, shock and awe is pretty much still in effect."

He had faced a possible life sentence if convicted on two charges of murder and conspiracy to commit murder.

He also faced charges of dereliction of duty, giving a false statement, and conduct unbecoming an officer.