Ted Terry, 59, was accused of calling railway customer services worker Amarjit Talafair a "f****** Paki" before headbutting him outside a City of London pub on March 22 last year.
A jury of seven men and five women took an hour and 20 minutes to find him not guilty of racially-aggravated common assault and racially-aggravated fear or provocation of violence.
Terry appeared emotional as he left the courtroom with colleagues and co-defendants Stephen Niland, 36, and Tudor Musteata, 47, who were also cleared of hurling racist abuse at Mr Talafair.
"I just feel relieved really," the former England captain's father said.
"It's been a hard year for all of us. We all felt it was nothing, really. It was stupid."
Later he said: "I'm just going home and I'm going to phone John up."
Outside the court building the defendants, who work together as decorators, hugged each other and their family members.
During the five-day trial, defence barristers argued that the prosecution's witnesses all knew each other and had conspired together to back up Mr Talafair's race abuse claims.
Mr Talafair told the jury he had suffered no injury from Terry's alleged headbutt because he was able to get out of the way in time.
He admitted calling Terry a "fat bald prick" during the stand-off and that he had only reported the incident to police the following day after researching him online.
The complainant also admitted asking officers about taking his story to the press, but was told it would hamper the investigation, the court heard.
He said that as a football fan he had been aware that John Terry had stood trial in 2012 for allegedly racially abusing former QPR defender Anton Ferdinand.
The Chelsea captain was cleared at Westminster Magistrates' Court but later faced disciplinary action from the FA, sparking his retirement from the national side.
Jurors heard that the confrontation on March 22 last year started after a dispute over a cigarette outside the Windsor pub near Fenchurch Street station.
Both Terry and Mr Talafair's groups had been drinking in the pub to celebrate birthdays.
Terry had around seven or eight pints of beer, while Mr Talafair said he had drunk some six single Jack Daniel's with coke.
Giving evidence, Terry admitted putting his face against Mr Talafair's and calling him a "f***** tight prick", but denied headbutting him or saying "f****** Paki, let's have it right here and now".
The father of two and grandfather of six told the jury: "I just said 'f*** off, go back downstairs', things like that. It wasn't no racist stuff."
Terry, of Lennox Close in Grays, also denied calling station cleaner Bakeba Mansuila a "black c***" as the group made their way towards the station - although no charges were brought over that incident.
The jury heard that he had a previous conditional discharge for common assault in 2005 and a suspended prison sentence for supplying class A drugs in 2010.
Less than two months after being arrested for the confrontation outside the Windsor, Terry racially abused an Irishman, the court heard.
He was fined £200 after he admitted saying ""f****** Irish prick" during a bust up at Barking rail station on May 12, the court heard.
It was also alleged that he had called the man a "pikey c***" - a claim that Terry denied.
During cross-examination by prosecutor Alex Chalk he denied he was "somebody who becomes aggressive in a heartbeat" or that he tended to "lash out" with racist abuse when he became angry.
Former schoolboy boxing champion Niland of Quarles Park Road in Romford, Essex, and Moldova-born Musteata, of Tarves Way in Greenwich, south east London, were found not guilty of racially-aggravated fear or provocation of violence.
Both had denied using racist language during the fracas.