Dante Soiu, 67, was acquitted of felony stalking and a lesser charge of attempted stalking by a Los Angeles Superior Court.
It followed a trial in which the 43-year-old actress read out some of the 48 letters sent to her by the former pizza deliveryman.
A tearful Paltrow told the jury Soiu had sent her letters containing religious and pornographic messages and that she feared for her children's safety.
"I'm scared because the communications completely defy logic," she said. "I've been dealing with this for 17 years with the communications from this man."
Some of the letters mentioned Soiu's desire to marry Paltrow and cleanse her of her sins.
His obsession with Paltrow followed her Academy Award-winning performance in the 1998 film Shakespeare In Love.
Soiu's lawyer in the latest case, Lynda Westlund, said she believed the jury had made the right decision.
"He just needed the right medication. He is completely lucid," she said.
Describing Soiu as "a little different", she added: "He's unique. He's special. But... he's very cogent."
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