The Manhattan District Attorney's Office told the court that prosecutors had reason to "reassess the position about the strength of the case."
"I think it's kind of appropriate that on the eve of Independence Day, we get to celebrate," said Strauss-Kahn's attorney Benjamin Brafman.
However, the district attorney's office did not move to dismiss the charges. Prosecutors say they still have evidence of a sexual encounter.
The accuser's attorney, Kenneth Thompson, was outrage.
"The only defense that Dominique Strauss-Kahn has is that this sexual encounter was consensual. That is a lie," Thompson said.
From the beginning, Strauss-Kahn has maintained that he did not assault a housekeeper at a luxury New York City hotel. He is facing charges of attempted rape, sex abuse, a criminal sex act, unlawful imprisonment and forcible touching.
The allegations ended Strauss-Kahn's career as the director of the International Monetary Fund and put his ambition to become the next president on France on hold.
ABC News has learned that investigators uncovered significant issues with the accuser's credibility.
Strauss-Kahn's lawyers said they have discovered the accuser had a questionable relationship with at least one alleged drug dealer, and she discussed the financial benefit of pursuing charges against Strauss-Kahn, according to law enforcement officials and others familiar with the case.
Investigators have also come to believe that the woman lied about her own background, a law enforcement official told The Associated Press.
Prosecutors think she lied about details on her application for asylum in the U.S., including saying she had been raped in her native Guinea, the official told the AP.
"She actually recounted the entire story to prosecutors and later said it was false," the official said.
Prosecutors haven't necessarily reached a new conclusion about the allegations against Strauss-Kahn and have not decided whether to downgrade the charges, the official said.
ABC News has confirmed Lisa Friel, the chief of the Manhattan district attorney's sex crimes unit, has resigned the post she held for nearly a decade.
The Associated Press contributed to this report.
