Federal Judge for Rawson, Chubut, Gustavo Lleral closed the case on the grounds of a lack of evidence against Emmanuel Echazú, the Border Patrol officer accused of the forced disappearance and subsequent death of the 27-year-old artisan.
In a statement, Maldonado's family decried the decision and alleged the Judge Lleral had confessed to them privately that he had been pressured to close the investigation.
"He (Judge Lleral) communicated with Estela, the mother of Santiago, via telephone", the family said, alleging that he then proceeded to tell her: "I am calling you first so you do not find out in the media... I am being extorted... My whole team and I have been working as we're being pressured to close the case".
Security Minister Patricia Bullrich celebrated the court's decision on Twitter, saying "truth has triumphed over the tale", in reference to allegations against acting Border Patrol officers, which a large part of society believed.
"The Judiciary closed Santiago Maldonado's forced disappearance case and acquitted Emmanuel Echazú", Bullrich said.
"They (a broad reference to the Kirchner movement and its followers) lied, they wanted to trick society and create fear; today we made a step forward towards an Argentina of law and truth".
The Maldonado family and their supporters have long insisted the Border Patrol was responsible for his death, given the conditions and circumstances in which he died.
Maldonado's body was found in the Chubut River 78 days after he first disappeared on August 1, 2017 during a Border Patrol operative to dislodge a protest led by militant Mapuche activists over disputed land.
His disappearance led to mass protests in Buenos Aires where human rigths activists drew comparisons to the forced disappearances of the 1976-1983 dictatorship.
The case caused headaches for the government, just weeks before the 2017 mid-term elections.
Security Minister Bullrich, especially, was seen as actively working to defend the Border Patrol and discrediting any version of events but the government's. In the days prior to the disappearance, she famously said: "I won't throw any Border Patrol office under the bus".