No proof has been found that Jordanian national Mahmood B. was participating in the alleged plot, the Düsseldorf court said.
Two other men, Syrian national Saleh A. and Algerian citizen Hamza C., are still under investigation for allegedly having planned an attack in Düsseldorf's old town centre on the orders of Isis.
The case came to light when Saleh A. went to a police station in Paris in February last year and told officers that he had “a certain amount of information about a sleeper cell that was ready to strike in Germany”.
He had been registered as an asylum seeker in the Düsseldorf region in 2013 and Germany requested extradition from France after he turned himself in.
German authorities believe Saleh A. and Hamza C. joined Isis in early 2014 in Syria.
They crossed from Syria to Turkey in May 2014. From there they travelled separately in March and July in 2015 via Greece to Germany.
Prosecutors said the pair planned to finance the attack by selling a video to the Vatican with proof of life of a priest kidnapped by Isis in Syria.
They were also believed to have convinced Mahmood B. to join in the plot.
But the court said no evidence suggesting the Jordanian's involvement has been found.