The acquittal of Mathieu Ngudjolo on charges including rape and murder is only the second verdict in the court's 10-year history and the first time it has cleared a suspect.
Judges said that the testimony of three key prosecution witnesses was unreliable and could not prove definitively that Ngudjolo led the rebel attack on the village of Bogoro, but they emphasised that Ngudjolo's acquittal did not mean no crimes occurred in the village.
"If an allegation has not been proven beyond a reasonable doubt ... This does not necessarily mean that the alleged fact did not occur," Presiding Judge Bruno Cotte of France said.
Prosecutors say villagers were hacked to death with machetes and many of them raped by rebel fighters.
Rights organisations immediately called on the court to explain the acquittal to victims and survivors in the village of Bogoro, in Congo's eastern Ituri region, and improve its investigations.
"The acquittal of Ngudjolo leaves the victims of Bogoro and other massacres by his forces without justice for their suffering," said Géraldine Mattioli-Zeltner, international justice advocacy director at Human Rights Watch.
"The ICC prosecutor needs to strengthen its investigations of those responsible for grave crimes in Ituri, including high-ranking officials in Congo, Rwanda and Uganda who supported the armed groups fighting there."
Judges ordered Ngudjolo's immediate release, but the court's Chief Prosecutor, Fatou Besnouda, said she would appeal the verdicts and asked for Ngudjolo to be kept in custody. The court scheduled a hearing for later today to consider the request.
Ngudjolo showed no emotion as Cotte acquitted him.
The Hague: The International Criminal Court Monday acquitted a Congolese militia leader of all charges of leading fighters who destroyed a strategic village in eastern Congo in 2003, hacking to death and raping some 200 people including women and children.
First Published: Tuesday, December 18, 2012, 17:24