They had appealed on the grounds that the DNA evidence useed to convict them was flawed.
The verdict was reached by a jury of eight, comprising two judges and six citizens.
Both Knox and Sollecito are now free to leave prison immediately.
Knox was sentenced to 26 years in prison in 2009. Sollecito was sentenced to 25 years at the same time.
A third person – Rudy Guede, 24 – was also convicted of Miss Kercher’s murder in a separate trial and was sentenced to 30 years in prison.
His conviction was upheld on appeal but his sentence reduced to 16 years.
Knox, 24, and her ex-boyfriend Sollecito, 27, were transported back to prison while the jury deliberated. As soon as it was announced a verdict had been reached, they were brought back to court.
The families of Knox and Sollecito were all present in the court room along woth the family of Meredith Kercher.
Newswarped would like to add that Amamnda Knox is fortunate that she is both pretty and American. Had she been ugly there is no chance her appeal would have been successful. That is justice for you. Public relations and perceptions are powerful weapons in influencing decision makers. At times the facts can become a sideshow. That is right – blame the black guy from the Ivory Coast.
At the end of the day a young woman is dead. Nothing will change that. It is a tragedy.