The 26-year-old star was scheduled to appear in court on Tuesday following her arrest on September 19 after she was said to have left the scene of an accident in which she allegedly drove a Porsche into a passerby at New York City's The Dream Hotel.
But the Manhattan District Attorney's Office has dropped the case after examining surveillance footage and deciding there is not enough evidence against Lindsay, according to TMZ.
While the brunette beauty could pursue civil charges, sources told the gossip website the 'Liz & Dick' actress is "ecstatic" the case has been dismissed.
The news comes shortly after it was revealed Lindsay's father Michael Lohan is seeking a conservatorship for her after growing concerned she is hanging around with the wrong people including her mother Dina Lohan.
Michael does not want to be made conservator - an appointed person who has legal control over the subject - and is requesting a judge decides who to appoint as a conservator for the 'Mean Girls' star.
Michael is convinced Lindsay has resumed abusing drink and drugs and he wants her conservator to persuade her to go back to rehab.
But following his intervention last Friday Lindsay is now reportedly seeking a restraining order against her father to stop him interfering in her life