Kim, who served as vice justice minister in 2013, was accused of having received sexual services arranged by a local developer, Yoon Joong-chun, and having received bribes from the latter and other businessmen between 2006 and 2008.
The Seoul Central District Court admitted that there had been "sex services" but said that the statute of limitations for the charges related to taking bribes and sexual services had expired.
Kim was cleared of other charges including informing Yoon of the status of a criminal investigation at his request in 2012.
When he was indicted and taken into custody in June, he claimed he had no memory of what happened 10 years ago and there is no objective evidence to back the prosecution’s charges against him.
Kim’s lawyer expressed respect for the ruling “in line with the principle of law and justice.”
Upon the ruling, he was released from detention.
Prosecutors previously sought 12 years in prison for Kim, 700 million won ($594,000) in penalty and 37 million won in forfeit.
Yoon, who was indicted for raping a woman together with the ex-vice minister, was cleared of the rape charge upon expiry of the statute of limitations, and received a 5 1/2 year sentence in prison for fraud at the lowest court.
The sex bribery case came to light after a video clip was leaked during an adultery probe against Yoon. The video showed a drunken orgy at the villa where men were having a sex party with several women. One of the men is believed to be Kim.
Kim has denied that it was him in the video.
Yoon was suspected to have sought business favors from government officials and other influential figures by providing them sexual services.
Prosecutors investigated the allegations twice between 2013 and 2014, but did not file any charges against him, sparking suspicions that someone powerful, possibly the presidential office, may have been protecting him.