Justice Timothy Brewer said the case had nothing to do with political connections and commentary.
His decision was based on the evidence in court about whether false declarations had been made on documents.
He said he found that the Crown had not reached the level of proof of beyond reasonable doubt which the judge said was a very high standard.
He said that on the evidence the most the Crown had achieved was a 'high level of suspicion" and that fell short of the standard of proof required to convict.
The judge said he would give a written reason for his decision later.
Mr Yan made no comment when he left the court.
But his friend, former Labour minister Dover Samuel welcomed the decision.
In a statement issued this morning, Labour leader David Shearer noted the court decision and stood by his decision to ask for an investigation into Mr Jones' actions.
An investigation would clear up the differences between evidence presented in court and Mr Jones' recollection of his decision to grant citizenship to Mr Yan, Mr Shearer said.
"Shane Jones assured me that he had followed the correct and proper process when handling this case as a former Minister in 2008. I accepted his assurance.
"The reasons we have asked the Auditor-General to investigate the case still stand.
Shane Jones must be given the opportunity to clear his name given the apparent differences in evidence given during the court case and Shane's recollection of events.
"New Zealand is highly regarded as being a country with open and transparent government. We must protect that reputation and reassure New Zealanders that ministerial and departmental processes are sound."
- Herald and Herald Online staff
