Mr Chiluba, a former bus conductor and trade union leader who served two terms in office between 1991 and 2002, had been accused of stealing $500,000 (£300,000) in public funds.
His acquittal came in spite of his failure to mount any substantial defence and his refusal to give sworn testimony. Questions were already being asked over the handling of the case, which has taken six years to reach a conclusion.
Reading his six-hour judgment in the capital, Lusaka, the magistrate Jones Chinyama said: "We are satisfied beyond reasonable doubt that the prosecution failed to prove that the accused stole funds."
Analysts say that the unexpected ruling will further undermine efforts to check rampant corruption through the courts in Africa. Recent efforts to pursue powerful political figures in South Africa and Kenya on graft charges have collapsed amid claims of interference with the judicial system. These setbacks could see campaigners turn to the International Criminal Court in The Hague which has so far concentrated on human rights abuses.
Mr Chiluba refused to recognise the court's authority and concentrated on mounting a publicity campaign portraying himself as the victim of a political witch-hunt by his successor Levy Mwanawasa with the backing of the "racist" British Government. Playing to the television cameras in court and flaunting his legendary, expensive wardrobe, the 66-year-old politician has sought to exploit his enduring popularity among poorer Zambians.
"Those who thought I am a thief should know now that that I am innocent," he told a press conference after the verdict. "As a Christian nation we do not steal but the devil will accuse you of stealing."
Prosecutors had chosen to pursue only a fraction of the monies alleged to have been looted by Mr Chiluba, which a UK court in 2007 estimated at more than $57m, in order to keep the case watertight. The former president's wife, Regina, was convicted in March by a Zambian court of receiving stolen goods but was freed pending her appeal and was in court with her husband to witness the acquittal.
Hopes of a conviction had been high, following the 2007 civil action, brought by Zambia's attorney general in Britain. The judge in that case had concluded that Mr Chiluba's official earnings after a decade in office amounted to $100,000 and yet, during the same period, he had spent five times that amount in a single shop, Boutique Basile, an exclusive outfitters in Geneva.
Investigators uncovered an extraordinary decade of spending while in office that saw the notoriously vain politician amass hundreds of designer outfits. The prosecution, led by Michael Sullivan QC, described accounts in several countries, including the UK, Switzerland and the Caribbean, that had been used to cover the president's lavish spending under the pretence of financing overseas intelligence operations.
Mr Justice Smith said in his ruling that Mr Chiluba should be "ashamed of himself" and ordered him to repay $57m in stolen monies. The judge remarked that "the president (unlike the emperor) needs to be clothed".
Mr Chiluba's lawyers are now challenging efforts to have the UK verdict registered in Zambia, which could freeze more of his assets including a valuable pension fund. A decision on the issue is due from Zambia's Supreme Court.
Resource-rich Zambia remains one of the poorest countries in the world. Its copper-dependent economy is subject to violent swings in commodity prices and 80 per cent of its 12 million people live on less than $1 a day.
Mr Chiluba's political career is typical of the failures of leadership that have blighted post-independence Africa. He rose from a lowly station as a bus driver through the ranks of the national builders' union to head of the Zambia Congress of Trade Unions. He then formed a new political party and in 1991 successfully challenged independence leader Kenneth Kaunda who had been in office since 1964.
Hailed as one of a new breed of African renaissance leaders, Mr Chiluba quickly disappointed reformists as he dispensed with independent voices in cabinet and surrounded himself with cronies. Corruption became a way of life, leading one Zambian commentator to remark that, while Kaunda's people had been pickpockets, Chiluba's lot were thieves.
The former democratic champion was forced to stand down after efforts to change the constitution in order to run for a third term were thwarted by an uprising in his own party.
His attempt to handpick a replacement saw him anoint his vice president, Levy Mwanawasa, but the protégé was disgusted by the extent of the looting he found and set up an anti-corruption panel to pursue the chief culprits. Those efforts delivered a number of high profile scalps prior to Mr Mwanawasa's death last year following a stroke.
The new President, Rupiah Banda, promoted from vice president and elected to see out the remainder of Mr Mwanawasa's term, has been accused of going back on anti-corruption efforts.
Well-heeled: Chiluba's shoe fetish
*Fresh from his court victory, Zambia's former president may now choose to reclaim some of the remarkable store of possessions that has been gathering dust in the offices of the country's anti-corruption task force during the six-year legal battle.
The contents of a collection of metal trunks bear witness to Frederick Chiluba's incredible sartorial extravagance: small mountains of silk dressing gowns and pyjamas, monogrammed dress shirts and tailored suits, many from the same Geneva store, whose owner Antonia Basile remembers payment sometimes arriving in suitcases stuffed with cash.
Pride of place must go to the more than 100 pairs of custom-made, size 6 shoes, each with heels stacked two inches high to disguise Mr Chiluba's five-foot frame. Many of the pairs have been embossed in brass with his initials. The collection is reported to include lizard skin dyed to the colour of jade, cream coloured ostrich-skin slip-ons and red silk slippers.
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