David Calvert-Smith, prosecuting, said Daphne Thorne's confessions that she had suffocated all three of her babies over a number of years could not be relied on as true.
The Common Serjeant of London, Judge Neil Denison said that her case had been considered by "a bevy of distinguished and highly qualified experts". They had all "expressed the view that her confessions cannot be relied upon", he said. "Prosecution have adopted a realistic and compassionate approach."
The judge requested she should be discharged into the care of social services after her defence counsel asked for her to be "supported and rehabilitated" rather than being released on to the streets."
Mrs Thorne, from Dagenham, east London, had been charged with the murders of her sons, Peter, 13 months, Gary, eight months and Ian, seven months.
Each baby had been diagnosed as having died from natural causes. But after Mrs Thorne had a fourth child, it was decided she should see Professor Samuel Meadow in Leeds - the world expert on Munchausen's Syndrome by Proxy.
This is a mental disorder whose sufferers seek attention for themselves by simulating injuries or injuring others.
While travelling to see Professor Meadow "she became hysterical and said she had done something very bad and wanted to talk about it", said Mr Calvert-Smith. "She proceeded to admit she had suffocated all three babies. She was arrested on her arrival at Leeds where she repeated her admissions."
She was charged in June 1994. Mr Calvert-Smith said police handling of the case had been "thoroughly responsible and realistic".
Mrs Thorne was held in custody in the secure unit of Hackney Hospital until yesterday.
In March an "eminent" psychologist expressed doubts on whether it would be safe to rely on her self-incriminating evidence. A psychiatrist agreed.
By July a defence report from a distinguished paediatrician concluded Peter and Ian could well have died from medical conditions, Gary could have been a cot death. The three had died between January 1990 and February 1993.
A well-known psychiatrist was approached for the prosecution and reported: "Mrs Thorne's admissions in regard to her children cannot be relied upon. It would be wrong to put these confessions before a jury to be relied upon as the truth."Reuse content