All four had been convicted over Pearl's kidnapping and murder, including British-born Ahmed Omar Saeed Sheikh, who was sentenced to death for masterminding the murder. He has been in jail for 18 years awaiting the outcome of an appeal.

Pearl, 38, was investigating Islamist militants in Karachi after the September 1, 2001 attacks on the United States when he was kidnapped. A video of his beheading emerged weeks after Pearl was abducted.

"No evidence has been brought on record by the prosecution to link any of the appellants to the murder of Pearl and as such all the appellants are acquitted of murder," said a two-member bench of the Sindh High Court.

The United States slammed the ruling, with the top US diplomat for South Asia writing on Twitter that the verdict "is an affront to victims of terrorism everywhere."

The court also acquitted all four of charges of kidnapping the American for ransom, and found Sheikh guilty only on the charge of abduction.

Sheikh was sentenced to seven years on the abduction charge, but he is expected to be freed soon given time already served.

"Omar has already served 18 years, so his release orders will be issued sometime today. He will be out in a few days," Khawaja Naveed, a defence lawyer in the case said.

A senior Pakistani government law officer says the state would appeal against the Sindh High Court's verdict.

"We welcome Pakistan's decision to appeal the verdict," acting US Assistant Secretary of State for South and Central Asian Affairs Alice Wells said. "Those responsible for Daniel's heinous kidnapping and murder must face the full measure of justice."

The convictions in Pearl's murder case had been brought into question when another defendant, Khalid Sheikh Mohammed, one of the alleged masterminds of the September 11 attacks, told a US military tribunal in 2007 that he beheaded Pearl.

Australian Associated Press