Federal Prosecutor Harald Range told the Frankfurter Allgemeine Zeitung that "for the great good of freedom of expression and press" the investigation would be stopped.
German prosecutors had handed Netzpolitik.org a letter informing it of an investigation against two of its journalists for "treason" due to two leaked security documents it published earlier this year, the blog reported on Thursday.
Netzpolitik journalist Andre Meister, one of the journalists who had been under investigation, told The Local that the investigation was "absurd" and a "heavy blow" for press freedom in Germany.
He had also warned that the inquiry could just be the beginning of attempts to clamp down on leaking of security service documents, claiming that the federal prosecutor was also considering an investigation against the Süddeutsche Zeitung on similar grounds.
"This is an attempt to curtail the media publishing damaging material, but it is also an attempt to put pressure on sources to stop leaking in the future," he said.
The investigation related to a 2013 document published on February 25th which lays out the internal security agency's – Bundesamt für Verfassungsschutz (BfV) – plans to collect mass data from social networks such as Facebook, Twitter and YouTube in order to "make connections that are until now unknown."
The article also reveals the secret budget allocated for the programme as being €2.75 million.
The second document, published on April 15th, relates to a unit being set up by the BfV named the "Extended Specialist Support Internet" unit which aims to extend the security agency's ability to eavesdrop on social media.
The document designates 75 security operatives to spy on online chats on Facebook.
The letter from the federal prosecutors, addressed to Netzpolitik editor Markus Beckedahl, informed him of the investigation against himself, Meister and the source of the leaked documents, simply described as 'unknown.'
The journalists were being investigated under German criminal code section 94, which defines treason as allowing "a state secret to come to the attention of an unauthorized person or to become known to the public in order to prejudice the Federal Republic of Germany or benefit a foreign power."
The offence carries a minimum of five years in jail, but serious cases can be charged for life.
"We will continue to publish documents when we believe there is public interest in their publication," Meister said, but expressed concern that the legal costs could endanger their future work since the website is reliant on donations for its survival.
Netzpoliztik has garnered increased attention in recent years as it has minutely covered the progress of a parliament investigation into the United States National Security Agency (NSA) spying programme in Germany.
Meister has written live minutes from the proceedings which even security personnel have admitted to using to inform themselves on the investigation's progress.
In 2014, Netzpolitik was awarded a Grimme Online award, the online version of a famous television prize handed out annually in Germany.
Concurrently, interest in the work of the German intelligence services has gained ever greater media attention, as connections with dubious practices of the NSA have been exposed.
In April it was revealed that the German foreign intelligence service, the BND, had facilitated NSA in spying on senior French and European politicians and major European firms.
Internal spying has also made headlines in recent months as the coalition government has agreed upon a law allowing mobile phone companies to retain call data from their customers.