The retrial verdict by a United Nations court in The Hague comes on the heels of the acquittal two weeks ago of top Croatian general Ante Gotovina, fuelling nationalist accusations in Serbia that the court is biased against them.
The verdict, and Mr Haradinaj's return to frontline campaigning, could undermine a new effort by the European Union to encourage Serbia and Kosovo to mend ties almost five years after the former southern Serbian province declared independence.
Mr Haradinaj was accused with two accomplices of persecuting ethnic Serbs in Kosovo during a 1998-99 war between guerrillas of the Kosovo Liberation Army (KLA) and security forces under Slobodan Milosevic.
Judges at The Hague ruled there was no evidence to support the charges of crimes against humanity.
Mr Haradinaj, 44, was prime minister for several months in 2005 but resigned when he was first charged. He was acquitted in 2008 but appeal judges ordered a partial retrial, saying the prosecution should have been given more time to make its case.
Kosovo's government said the verdict was vindication of the insurgency.
"This verdict is the strongest evidence that the KLA fought a just war for freedom and never committed the crimes of which we were unfairly accused," Kosovo Prime Minister Hashim Thaci said.
Serbia's nationalist President Tomislav Nikolic said the ruling was further evidence the UN tribunal for the former Yugoslavia was "formed to try the Serbian people" for the wars of Yugoslavia's collapse.
He warned it would annul progress made in fledgling EU-mediated talks between Belgrade and Pristina. Progress in the talks is a key condition of Serbia's further integration with the EU, which made Belgrade an official candidate for membership in March.