Here are the latest updates on this story:
Zakia Jafri, 75, wept as the court pronounced its verdict. She told NDTV that she was saddened, but not disheartened. Her lawyer has said that they will contest the decision of the Ahmedabad court within a month.
The BJP has called today's order "a victory of truth." The party's Arun Jaitley said, "Modi goes into the 2014 campaign untainted by propaganda. The verdict has proved that propaganda can never be a substitute for truth."
Mrs Jafri had alleged that Mr Modi colluded with senior ministers, bureaucrats and the police to fan the communal violence that tore through the state. (Zakia Jafri's plea against clean chit to Modi 'a piece of fiction': SIT counsel)These allegations were investigated by a Special Investigating Team or SIT appointed by the Supreme Court in March 2008. (Narendra Modi can be prosecuted: Report by Raju Ramachandran)
After four years, the SIT said in February 2012 that there was no prosecutable evidence against Mr Modi and 59 others in this case and filed a closure report indicating its inquiry has ended. ('SIT report ignored testimony against Narendra Modi,' says retired judge who probed 2002 riots)
The SIT's lawyer said today, "There is no criminal case against Mr Modi now." A copy of the judgement will be released soon.
Ehsan Jafri, a former Congress MP, was among the 68 people of Gulberg Society in Ahmedabad, killed by a mob on February 28, 2002. Mr Jafri's frantic phone calls for help to the police and politicians were allegedly ignored.
Mr Modi was interrogated in 2010 by the SIT for over nine hours. (Timeline of Zakia Jafri's case against Narendra Modi) In 2011, the Supreme Court refused to hear the case and said it would be handled by an Ahmedabad court. (Narendra Modi tweets 'God is great', Supreme Court won't monitor Gulbarg Society case)
In April 2011, Sanjiv Bhatt, who was a senior police officer in 2002, said that at a meeting, Mr Modi told him and other cops to allow Hindus in the state to exact revenge for the killing of 59 karsevaks on the Sabarmati Express near Godhra.
But the SIT concluded that Sanjiv Bhatt's testimony was not reliable because he was nursing a grudge against the government as he was sidelined by the Modi administration.
The SIT also alleged that the petition was a motivated one and was filed at the instance of activist Teesta Setalvad.