Judge Immacolata Iadeluca's not-guilty verdict sparked wild celebrations in the Turin courtroom where De Luca had been tried.
"An injustice has been avoided," the 65-year-old said moments after the verdict, describing the charges brought against him as "an attempt to sabotage my freedom of expression."
The veteran left-wing activist added: "Today what I would like to sabotage is the passivity of Italians: we have become used to corruption being a fact, to the newspapers not reporting the facts. We need acts of resistance."
De Luca's case had been seen as both a cause celebre for anti-globalisation campaigners who defend direct action tactics as morally justified when the environment is under threat, and a test of the legal limits of artistic freedom.
The writer had been accused of encouraging vandalism in 2013 interview comments in which he described sabotage of the rail link as "legitimate" and "just", with the prosecution arguing that his international fame made it likely that his stance would encourage militants to act.
Announcing the verdict, Judge Iadeluca said the crime of incitement had not been committed.
She did not immediately explain the basis for her verdict but De Luca's defence had focused on two points: that it was not possible to show a causal links between his words and acts of vandalism and that the verb "to sabotage" had several nuanced meanings, not all of them implying physical acts.
De Luca had said he was prepared to go to jail to make his point.
Prosecutors had requested an eight-month prison term.
The novelist had particularly objected to being tried under "an article of law which dates back to the fascist period" which had never been applied to a writer before.
A petition calling for his case to be thrown out has been signed by over 500 artists from 20 countries, including British film director Ken Loach, Italian jazz trumpeter Paolo Fresu, German author Brigitte Glaser and French actress Isabelle Huppert.
A life-long radical
De Luca was prosecuted at the instigation of LTF, the Franco-Italian consortium building the multi-billion-euro link from Lyon in France to Turi in northwestern Italy.
Italian authorities later joined the prosecution.
In his final plea to the court on Monday morning, the writer had said "to sabotage" has several possible meanings, not all of them amounting to physical action.
"I am defending the origin of the word sabotage in its most effective and broadest sense," he said.
"I am ready to be given a criminal conviction for using it, but not to allow my Italian language to be censured or diminished."
He also reiterated the sentiments that got him into trouble in the first place, saying the section of the line through the pristine Val di Susa on the Italian side of the Alps should be "held back, hampered, therefore sabotaged in the legitimate defence of the health, the soil, the air and the water of a threatened community."
As well as being attacked by environmentalists, the rail link has been criticised as a misuse of public funds by France's public spending watchdog.
The two governments are however strongly committed to the €26 billion ($29 million) project scheme, which is expected to be finished by 2030.
De Luca is a life-long radical whose literary tales centred on his home city of Naples have been translated into English, French, German, Spanish and a number of other languages.
He is best known for "Montedidio" (2001, translated into English as "God's Mountain" in 2002) which won one of France's best-known literary prizes, the Femina.