The jury of two judges and six private citizens concluded there was no proof to convict Mr Andreotti of commissioning the Mafia killing of an investigative journalist twenty years ago. Mr Andreotti was charged with premeditated murder along with five other people.
His co-defendants - the former foreign trade minister Claudio Vitalone, two convicted Mafia bosses, Gaetano Badalamenti and Pippo Calo, a Mafia hitman, Michelangelo La Barbera, and a common criminal, Massimo Carminati - were also acquitted. Mr Andreotti, who is 80, did not attend the hearing. Lawyers for the prosecution are expected to appeal.
Mr Andreotti is still on trial in the Sicilian capital Palermo on Mafia association charges. The verdict in that case is due in the autumn.
The Perugia murder trial involved the death of a journalist with close links to the secret services, Mino Pecorelli, who was gunned down outside his Rome office in March 1979. The prosecution argued that Mr Andreotti ordered the killing because Mr Pecorelli had information that "would not be just embarrassing but dangerous" and planned to publish it in his magazine Osservatore Politico.
Shortly before his death, Mr Pecorelli was planning to publish an incriminating article on Mr Andreotti, then prime minister, entitled "All the President's Cheques", dealing with Mr Andreotti's role in the Italcasse scandal which involved slush funds, kickbacks and state bank loans to business associates in trouble.
But even more damaging, the prosecution argued, was the possible publication of a memoir written by a former leader of Mr Andreotti's Christian Democrats, Aldo Moro, who was kidnapped and murdered by the Red Brigades. During his imprisonment, Mr Moro, whose party refused to negotiate his release, apparently put on paper details of the scandals and misdoings of his party colleagues. Various and conflicting versions of the document exist.
Much of the prosecution case in the Pecorelli murder trial was based on the evidence of Mafia witnesses. The senator's defence lawyers say the informers are unreliable and are manipulated by magistrates to back up the prosecution case, in return for reductions in their own prison terms. They have stressed the crackdown on organised crime under one of Mr Andreotti's governments in the eighties.
They said Mr Andreotti was always surrounded by bodyguards and had no possibility to meet mafia bosses.