According to the indictment, Nikola Vein, 33, and Tibor Fuer, 32, intended to detonate an explosive device in the territory of Croatia with the aim of creating a feeling of insecurity among the public.
Vein was caught in Zadar's ferry port on November 26, 2006 while in possession of a highly destructive explosive device.
Fuer, who claimed he had only given Vein a lift to Zadar, managed to escape but was apprehended the same day in the nearby town of Obrovac. He insisted that only after they had arrived in Zadar had he found out that Vein intended to deliver the explosive device to someone.
Judge Ante Anic said there was no evidence to support the allegation that the two men conspired to commit an act of terrorism against the state.
Vein and Fuer were released from detention.
County prosecutor Ivan Galovic said he would lodge an appeal after he received from the judge a statement of reasons for the judgement.