According to the ruling handed down in the western city of Wuppertal, the men's orange jackets did not constitute a breach of rules on wearing uniforms.
The men, followers of the ultra-conservative Salafist form of Islam, had patrolled the streets of Wuppertal in the summer of 2014, demanding that nightclub revellers stop drinking alcohol and listening to music, and called for an end to gambling.
Sven Lau, a German Salafist convert who acted as the leader of the so-called “sharia patrol”, is the only member of the group who could still potentially face charges – for organizing a public meeting without notifying authorities.
The incident sparked controversy in Germany, with Chancellor Angela Merkel responding that no one has a right to do the police's work for them.