Rotterdam District said Jason Halman "was in a state of psychosis at the time of the stabbing" and could therefore not be held accountable for his actions.
Greg Halman hit .230 in 35 games for the Mariners in 2011 and made starts at all three outfield positions before being optioned to Triple-A Tacoma.
The 24-year-old Halman died after being stabbed in the neck on Nov. 21 at an apartment in Rotterdam, reportedly following an argument over loud music.
In a written statement, the court said Jason Halman was allowed to walk free after psychiatric and psychological assessments found "there is only a remote chance of any reoccurrence; it is well possible that the psychosis has been a singular event."
Halman had already been released from custody two weeks ago after prosecutors joined defense attorneys in saying that he should be acquitted on mental health grounds.
Born in the city of Haarlem, Greg Halman played in the Dutch Pro League and was part of the gold-medal winning Dutch squad at the 2007 European Championship and played for the Netherlands at the 2009 World Baseball Classic.