The British-made documentary explores the alleged oppression of Tamils by the Sri Lankan government.
In acquitting Lena Hendry, Magistrate Mohd Rehan Mohd said the prosecution failed to show a prima facie case against her.
Hendry's lawyer, New Sin Yew, said he was grateful that the court agreed with their argument.
“We have been maintaining since the first day that the charge against her is frivolous as it has no basis,” said New.
Hendry was seen beaming with joy as she made her way out of the court.
“I am happy that the court dropped the case as it has been long journey. They should not have charged me. It has been such a waste of time for the court and us," Hendry told reporters on Thursday.
Eight prosecution witnesses were called throughout the five day trial which began in December last year until January.
Hendry claimed trial in a Magistrate’s court on Sept 19, 2013 to illegally screening “No Fire Zone”.
She was charged under Section 6(1)(b) of Film Censorship Act, 2002 which carries up to three years’ jail or a fine not exceeding RM30,000, if convicted.
Hendry filed the application at the High Court registry to quash the charge on Nov 25, 2014.
On July 3, 2013, Hendry and two other Pusat Komas activists – Anna Har and Arul Prakkash – were arrested in a raid by the Home Ministry when they tried to screen the controversial documentary.