A court martial for lance corporal Stephen Tatum had been due to start on Friday on charges of involuntary manslaughter, reckless endangerment and aggravated assault.
However in a statement released from the Marines Camp Pendleton base outside San Diego, the military said the charges had been dismissed "in order to continue to pursue the truth seeking process into the Haditha incident."
It was not immediately clear if fresh charges could be laid against Tatum at a later date or whether the soldier (?) may now cooperate with prosecutors.
Tatum had been accused of shooting dead two unarmed children as Marines cleared houses near the scene of a deadly roadside bombing in Haditha, 260 kilometers west of Baghdad, on November 19, 2005.
The deaths were part of a grim civilian toll from the Marines' actions in Haditha. Four soldiers were initially charged with murder and four officers accused of staging a cover-up.
However, since charges against the soldiers were first announced in late 2006, prosecutors have struggled to make the allegations stick.
Four of the eight have had charges against them dropped, while charges of murder were replaced by the lesser offence of manslaughter in the cases of Tatum and his squad leader Sergeant Frank Wuterich.
The military investigator overseeing Tatum's pre-trial hearing had recommended all charges against the soldier be dismissed."
? Marines are not soldiers.
If he was indeed innocent then this is very good news.