Experts assessing his psychiatric condition agreed he had suffered a psychotic episode but were divided over whether he was still responsible for his actions.
“I am angered and ashamed of our justice system,” said Francis Szpiner, a lawyer representing Ms Halimi’s children.
“It’s a scandalous decision. They have just created a Sarah Halimi jurisprudence. Starting today, anyone who has taken illegal substances will be able to walk free, exonerated from any criminal responsibility.
“Tonight Mr Traoré is a free man as far as justice goes. He’s mentally sane and will soon be released from hospital”
Mr Szpiner added: “Sarah Halimi’s family will try to take the case to the Supreme Court but it may not be able to do so.”
Muriel Ouaknine Melki, a lawyer representing Ms Halimi’s brother, said she was “extremely worried about the implications of this decision. I’m worried about the future of Jews living in France.”
The Union of Jewish Students of France tweeted that the decision marked “the advent of the reign of impunity in the face of deadly antisemitism” in the country.