Speaking after the verdict, Miss Knox said she felt "tremendously relieved".
"The knowledge of my innocence has given me strength in the darkest times of this ordeal," she said. “And throughout this ordeal, I have received invaluable support from family, friends, and strangers. To them, I say: Thank you from the bottom of my heart. Your kindness has sustained me," Miss Knox said.
Various friends and family members gathered in the back garden in their back garden in Seattle, amid an atmosphere of relief and jubilation and people could be heard yelling: “Freedom! Freedom!”
Miss Knox’s step-mother Cassandra and her daughters hugged, kissed and embraced for the cameras, putting their thumbs up, saying: “We're happy campers, we're happy happy! Its about time - we knew all along.”
Miss Knox was portrayed by prosecutors as a promiscuous temptress and “she-devil”, while her family and defence lawyers said she was the victim of a dysfunctional legal system and deeply unfair character assassination.
Miss Kercher, 21, from Coulsdon, Surrey, was found dead in the bedroom of the hillside cottage she shared with Miss Knox and two Italian women in Perugia, Umbria, in Nov 2007.
She had been sexually assaulted and then stabbed in the neck. Prosecutors insisted that the outgoing undergraduate was killed as a result of a drug-fuelled sex game that spiraled out of control.
But Miss Knox and her then boyfriend insisted they had nothing to do with the crime and that they had spent the night in question watching a film, smoking marijuana and having sex.
The judges’ ruling came as a huge surprise because it had been expected that the best possible outcome for the two defendants would have been to have their case referred to yet another appeals court. Few experts had predicted that their convictions would have been annulled altogether.
“I’m very happy for Amanda and I believe she will be very happy too,” said Luciano Ghirga, Miss Knox’s lawyer.
“It’s a brave decision which has renewed my faith in the Italian justice system. Amanda always insisted she was innocent. Now she can get on with her life.”
Another member of her legal team, Carlo Dalla Vedova, said: “It’s over! It couldn’t be any better than this.”
For Meredith's mother Arline however it is not over: "I am a bit surprised, and very shocked if I'm honest. I don't know what to say. They have been convicted twice so it's a bit odd that it should change now."
Miss Knox, whose sometimes eccentric behaviour, suggestive nickname of 'Foxy Knoxy' and girl-next-door good looks made her a tabloid favourite, was not in court, having vowed never to willingly return to Italy after her initial acquittal in 2011.
Before her release, she had spent four years in an Italian jail. She anxiously awaited news of the court’s decision at her parents’ home in Seattle.
David Marriott, her spokesman in Seattle, said the verdict was “unexpected”. He added: “I personally feel overjoyed that the truth has won out, that she is innocent.”
The panel of five judges said there was insufficient evidence to support the convictions. The full reasoning for their ruling has to be released within 90 days.
Francesco Maresca, the lawyer for the Kercher family, said he was bitterly disappointed with the decision.
“There’s not much to say. It is a huge surprise. It’s a drastic decision and a definitive one.”
Patrick Lumumba, 45, a Congolese bar owner whom Miss Knox falsely accused of having murdered Miss Kercher, said: “It is a huge judicial error. I’m very disappointed, but there is nothing more that can be done.”
Giulia Bongiorno, Mr Sollecito’s lawyer, whooped with joy and jumped into the arms of a colleague when she heard the news on the steps of the imposing supreme court building.
Moments after the verdict was announced, friends and family of Mr Sollecito cheered and clapped, shouting “acquitted, acquitted!”
Prosecutors had called for Miss Knox to be sent to jail for 28 years and for Mr Sollecito to spend 25 years behind bars.
During her final address to the court, Ms Bongiorno, one of the country’s leading criminal lawyers, said Mr Sollecito had no motive for murder, that there was no trace of his DNA in the bedroom where Miss Kercher was stabbed to death, and that the knife seized by police was not even the right murder weapon.
“Raffaele Sollecito is an innocent who found himself dragged into a gigantic, high-profile event that he had nothing to do with. You know who he is like? Forrest Gump. I ask you to overturn his conviction.”
The key piece of evidence linking Mr Sollecito to the murder – traces of his DNA on a clasp that had been cut from Miss Kercher’s bra – was unreliable, Ms Bongiorno said.
It took investigators 46 days to find the bra clasp on the floor of Miss Kercher’s bedroom, by which time it had been kicked around the room by forensic officers.
The conviction of the former lovers was the result of “a tragic cascade of errors” in the police investigation and subsequent trial, Ms Bongiorno told the court.
The annulment of their convictions means that the sole person in prison for the murder is Rudy Guede, a small-time drug dealer from Perugia who is serving a 16 year jail term after undergoing a separate, fast-track trial.
He was convicted largely on the base of DNA evidence found on Miss Kercher’s body and in the house where she was murdered.