Jonathan Barton, 31, a vice- principal of the renowned Ballet West School in Taynuilt, Argyll and Bute - who has a Jewish father - walked free from Oban Sheriff Court after a two-day trial.
Sheriff Douglas Small said there was a lack of corroboration from the evidence of two witnesses, which failed to prove the words were used with malice or ill will. He said that left only an innocuous 'artistic' comment.
After his client was cleared, Mr Barton's defence solicitor Gary McAteer said: "His father is Jewish, half of his family is Jewish.
"The Jewish side of his family are all very supportive of him, they know he is not capable of the type of conduct he was alleged of."
Mr Barton, of Taynuilt, whose school near Oban has comedian Billy Connolly as a patron, had chosen not to use his father's ethnic background to influence the court's decision.
He had pleaded not guilty to acting in a racially aggravated manner, that caused, or was intended to cause, alarm and distress to dancer Genevieve Huss in December 2010.
The London-based dancer had told the trial he said: "You all look like a bunch of Jews waiting to be shot in the rain."
Miss Huss, 20, said she was offended because her Jewish grandmother lost most of her family in the Holocaust and the words made her fear for her safety.
The court heard Mr Barton had immediately asked if anyone in the class was Jewish and had apologised to Miss Huss.
However, questions were raised in court about why it had taken Miss Huss so long to lodge a complaint.
Defending, Mr McAteer questioned why, when Miss Huss's parents had complained regularly to school, they had not complained about the alleged remark.
He asked Miss Huss if she had told her father immediately that Jonathan Barton's remarks were "innocently made", that she felt Mr Barton "genuinely liked her" and that she appreciated his teaching.
Mr McAteer said: "At the time you accepted you were of the view the comments were innocently made, he genuinely liked you and you appreciated his tuition?"
Miss Huss replied: "Yes."
Another witness Hazel Kirkwood, 25, from Falkirk, said she took the comment to be an example of how an exercise the students had been doing should look like.
But she added: "I don't think it was a good example to use."
Mr McAteer argued there was no case to answer because there was no corroborated prosecution evidence that it was made with malice or ill will.
He said: "There is no evidence that the accused's demeanour at the time, or anything else he said, showed contempt, or malice, or ill will, towards Jews, so all that is left is a remark made in an artistic context."
He said that while the remark, which the former pupils agreed was directed at the whole dance class, may have been an "ill-chosen analogy" it was not made maliciously, or against someone.
Despite being deplorable and ill-considered, Sheriff Small ruled it did not amount, when taking all the evidence into account, to a legal case to answer.