At an earlier trial in 2004, the prince, 56, a distant relation of Britain's Queen Elizabeth II, was found guilty of grievous bodily harm and fined €445,000.
But a new trial was granted after Caroline corroborated his account of the 2000 incident on the Kenyan resort island of Lamu, with the aristocrat seeking a complete acquittal.
The prince had told the new trial in Hildesheim through his lawyer that he had given Josef Brunlehner "two symbolic slaps" because he was annoyed about the noise and laser show at his hotel disco.
"One for the music and one for the lights," he had said.
But he said that accusations that he then beat up Brunlehner, a German national, under the influence of alcohol were "grotesque inventions and lies."
The defence said Brunlehner massively exaggerated his injuries.
"The court was not in a position to be able to decide between the two versions," judge Andreas Schlüter said on Tuesday.
"He dealt Brunlehner two powerful clips round the ear in quick succession. Not the done thing, but not unrestrainedly violent either."
He added: "There is no victor here. All those involved are on the losing side."
The prince married Caroline, the daughter of actress Grace Kelly and Rainier III of Monaco, in 1999. He was not present in the courtroom when the verdict was delivered.
Caroline, 53, testified in mid-January.