Chatchom Akapin, the department's director of global affairs, said the decision was made under Section 21 of the Prosecution Act which allows for cases to be dropped if they are not in the public interest.
Prime Minister Scott Morrison confirmed on Monday night that, as of 9pm, al-Araibi had been freed from prison and was on his way to the airport to travel back to Australia.
Bahrain footballer Hakeem al-Araibi is brought to the Criminal Court in Bangkok on Feb 4 for an extradition request from Bahrain.
Al-Araibi fled Bahrain in 2014 before being granted permanent residence in Australia.Bahrain had issued a request for his arrest on the grounds of an act of vandalism al-Araibi maintains he did not commit, as he was playing a soccer game at the time of the alleged incident.
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In November previous year, he and his wife flew to Thailand for their honeymoon, believing his Australian visa allowed him to travel safely, but they were detained immediately when they landed at Bangkok's Airport in response to an Interpol "red notice".
Al-Araibi has said he was blindfolded and had his legs beaten when he was held in Bahrain previously.
A court filing from Thai prosecutors had noted that while Thailand and Bahrain do not have an extradition treaty, extradition is still possible by law if Bahrain makes an official request - which it did - and if the crime is punishable by more than a year's imprisonment and is not politically motivated or a military violation. The refugee footballer will be returned to Australia after months of pressure from rights groups, former Socceroos, the Australian government and even the heroes of the Thai cave rescue.
"Fifa is committed to protecting human rights". She said "a great deal" of work had gone on behind the scenes.