In 2010, Richard Alarcon was accused of living outside Council District 7 in Panorama City, and then lying about it. He and his wife, Flora Montes De Oca Alarcon, were indicted on 24 counts of perjury and fraud.
Alarcon says he was renovating the older house and occasionally lived in the newer Sun Valley home owned by his wife.
Judge Kathleen Kennedy dismissed the case, saying the district attorney's office failed to provide evidence favorable to the Alarcons.
Alarcon said in a statement that he and his wife were pleased with the ruling.
"We have maintained our innocence throughout this process and have always believed that when all of the evidence is considered, we would be found innocent," he said.
Alarcon's attorney Fred Woocher said he had expected that the district attorney would re-file the case.
"The judge wasn't ruling on any of the innocence or guilt or the ultimate conclusion of the case. What she was saying was the process needs to be fair, and you can't indict somebody unless they've had the opportunity to have the grand jury consider both sides of the case," Woocher said.
District Attorney Steve Cooley called the decision "inexplicable."
"We will vigorously prosecute this case," he said in a statement. "We are evaluating our options to proceed."
A former state senator and assemblyman, Alarcon has served as the representative for Council District 7 since 2007.