Citing insufficient evidence, the high court of the eastern province of Fujian overturned the guilty verdict against Nian Bin, a grocery shop owner accused of fatally poisoning a fellow villager's two children in 2006.
Nian was immediately freed after the announcement. He spent eight years behind bars and repeatedly appealed his guilty verdict, with lawyers saying he was tortured into confessing to the crime.
Critics say political pressure to solve homicide cases often leads to wrongful convictions based on coerced confessions in China's heavily controlled judiciary system.
Nian's case, however, has attracted some of China's most prominent lawyers and wide attention in social media that put the local court on the spot.
"It's a case of life and death, and the court had little wriggling room when members of the public were watching closely," said legal scholar Zhang Xuezhong, who warned against viewing the rare acquittal as progress in China's judiciary independence and rule of law.
Zhang said it was troublesome that the trial court convicted Nian two more times even after higher courts cast doubt on the case, adding that the supreme court's authority to review death sentences worked out in Nian's favor.
Maya Wang, a Hong Kong-based researcher with Human Rights Watch, said the acquittal is likely to be unprecedented.
But noting the court's reluctance to review Nian's torture allegations, Wang said it is too early to say if the acquittal signaled any judiciary improvement.
"It took much concerted efforts by some of China's best-known rights lawyers to get the current court to acknowledge that there is insufficient evidence," Wang said. "The true test of progress is how the judiciary will handle the aftermath of Nian's acquittal: Will it hold the police officers who tortured Nian accountable?"