The ruling by the regional court in the western city of Duisburg for now halts efforts to prosecute those who planned the event over its chaotic crowd management.
“The state's accusations could not be proved with the evidence presented,” the court said in a terse statement after dismissing the charges against six city officials and four parade organisers.
“Hence a conviction of the accused could not be expected.”
The presiding judge was to comment on the ruling at a press conference later Tuesday.
Prosecutors and co-plaintiffs have the right to appeal the ruling within one week, as lawyers representing survivors of the stampede and victims' families reacted angrily to the court's decision.
Attorney Bärbel Schönhof told DPA news agency it amounted to a “slap in the face” for the “extremely traumatised” people at the parade that day.
German prosecutors had charged the 10 suspects with negligent manslaughter and bodily harm in February 2014.
The manslaughter charges would have carried sentences of up to five years in prison.
The incident occurred on July 24, 2010 when a large crowd of revellers at one of Europe's top electronic music events was forced to go through a narrow tunnel that served as the only entrance and exit to the festival grounds.
Those killed – 13 women and eight men who were crushed, trampled to death or suffocated – included seven foreigners, from Australia, Italy, the Netherlands, China and Spain.
More than 650 people were injured in the mass panic as pressure from a heaving sea of hundreds of thousands of young people squashed the victims against fences and walls.
Prosecutors blamed serious planning errors for the tragedy at the site, a former cargo rail depot in the industrial city.
The mayor of Duisburg at the time, Adolf Sauerland, became the prime target of public anger and was forced to resign by a 2012 city referendum, accused of having ignored warnings that the summer festival was a disaster waiting to happen.
The Love Parade started as an underground event in the former West Berlin in 1989 and was held there most years until 2006, at times drawing over one million people.
Following wrangling over permits and arguments over the mountains of trash left behind, the festival moved from Berlin to cities in western Germany's industrial Ruhr region until the tragedy of 2010.
The deadly disaster led organisers to declare that the Love Parade would never be held again “out of respect for the victims”.