Knox burst into tears of joy after the verdict was read out. The court also cleared Knox's co-defendant, Raffaele Sollecito, of the 2007 murder of Meredith Kercher, a 21-year-old Briton.
Inside the courtroom, Knox's relatives cheered and embraced as they absorbed the news that the four-year ordeal was finally over. As Knox's family made their way out of the courtroom, her younger sister, Deanna, stepped up to the microphone, now the joyful family spokesman.
"We're thankful that Amanda's nightmare is over," she told reporters outside the courthouse. "She suffered for four years for a crime she did not commit."
The eight-member jury acquitted both Knox and Sollecito of murder after a court-ordered independent review cast serious doubts over the main DNA evidence linking Knox and Sollecito to the crime. And while the court won't release its reasons for clearing the two for weeks, the discrediting of the DNA evidence was believed to have been the fatal blow to the prosecution's case in the absence of a clear motive.
The jury had two options to acquit: determining there wasn't enough evidence to uphold the conviction or that the pair simply didn't commit the crime. The jury determined the latter, clearing Knox and Sollecito completely.
However, the jury upheld Knox's conviction on a charge of slander for accusing bar owner Diya "Patrick" Lumumba of carrying out the killing. He set the sentence at three years, meaning for time served. Knox had been in prison since Nov. 6, 2007, five days after the murder.
Prosecutors can appeal the acquittal to Italy's highest court. As of late Monday, there was no word if they planned to do so.
Still, nothing in Italian law would prevent Knox from returning home to Seattle. An Italian lawmaker who has championed her case, Rocco Girlanda, said she was due to fly out Tuesday from Rome.
About 90 minutes after the verdict was handed down a black Mercedes carrying Knox was seen leaving the prison.
The Kercher family looked on grimly and a bit dazed as the verdict was read out by the judge after 11 hours of deliberations by the eight-member jury. Outside the courthouse, some of the hundreds of observers shouted "Shame, shame!"
"We respect the decision of the judges but we do not understand how the decision of the first trial could be so radically overturned," the Kerchers said in a statement. "We still trust the Italian justice system and hope that the truth will eventually emerge."
Earlier Monday, in what was an emotional speech proclaiming her innocence, Knox said accusations that she killed her roommate are unfair and groundless.
Knox said that she is "paying with my life for things I didn't do." She said she wants to go home and "back to my life."
Knox and then-boyfriend Sollecito were convicted in 2009 of sexually assaulting and murdering Kercher, whose body was found in a pool of blood in the house they shared in Perugia.
Knox and Sollecito have always denied wrongdoing.
Also convicted in separate proceedings was Rudy Hermann Guede, a small-time drug dealer and drifter who spent most of his life in Italy after arriving here from his native Ivory Coast. The courts that convicted him say Guede took part in the assault, leaving traces of DNA on the victim and at the crime scene.
Defense lawyers maintain that Guede was the sole killer, while prosecutors say that bruises and a lack of defensive wounds on Kercher's body prove that there was more than one aggressor holding her into submission.
The alleged murder weapon, a kitchen knife, had Kercher's DNA evidence on the blade and Knox's on the handle. It's the key piece of evidence linking Knox to the crime.
But two independent forensic experts said the DNA collection was shoddy and DNA traces were so small they couldn't be retested.
Last week, prosecutors called Knox a sex-loving she-devil. They wanted her 26-year sentence increased to life in prison.
Her defense attorneys fought back, telling the jury she had been a victim of a character assassination, and that she's innocent and had already spent more than 1,000 days in jail.
The case has spurred countless articles, books and even movies, and brought the Italian judicial system under a harsh spotlight in the U.S.
Knox supporters cheer appeals court's decision
In her hometown, Knox supporters cheered, clapped, and even shed a few tears when they heard the judge announce the appeals court's decision. Many of them have been camping out at a hotel in Seattle since Sunday night.
The supporters are part of a group called Friends of Amanda, made up of people who have known Knox for years and others, who only got to know her since she was locked away in an Italian prison. It was a tense 24 hours as they sat up through the night, listened as Knox made her final plea, and then waited more hours for the verdict to come down. When they learned Knox was being released after nearly four years in prison, the supporters began chanting, "She's free!"
"Four years this has taken, four years of these two young people's lives. They were absolutely innocent on day one, day two, all the way through. There has never been any evidence. It is a travesty to claim there was evidence, now it's overturned," said Joe Star, a friend of the Knox family.
Knox's friends and family in Seattle now wait for her arrival. They say for the first time in four years they know she is safe.
View photos of Amanda Knox reacting after an Italian appeals court overturned her murder conviction.
The Associated Press contributed to this report.