The decision, which came as much of the nation's attention was focused on the war with Iran, closed a flashpoint case that has bitterly divided Israel since the soldiers were arrested in 2024 at the notorious Sde Teiman military prison.
The arrest prompted anger from members of the far-right government and hard-line ultranationalists who violently overran the prison in protest.
Prime Minister Benjamin Netanyahu hailed the announcement that the charges would be dropped, while human rights groups accused the military of ignoring one of the gravest instances of abuse in the country's network of wartime prisons.
"Israel's military advocate general just gave his soldiers license to rape - so long as the victim is Palestinian," said Sari Bashi, executive director of the Public Committee Against Torture in Israel, after the case was dismissed.
She said the decision was "the latest in a long line of actions that whitewash abuses against detainees whose frequency and severity have worsened since October 7, 2023".
Netanyahu welcomed the decision, Israel must pursue its enemies, not its "heroic fighters".
The now-dismissed indictment against the soldiers accused them of an assault that included dragging a Palestinian prisoner along the floor, stepping on him, tasering him, and sexually assaulting him by stabbing him in the rectum.
The Palestinian was taken to an Israeli hospital with fractured ribs and a perforated rectum that required surgery before he was returned to the prison.
The allegations of abuse at the facility gained steam when, in August 2024, Israeli news broadcast a leaked video of the alleged assault.
The video showed a group of masked soldiers wresting a detainee from the ground, where he and other Palestinians were lying face down and handcuffed in a fenced-in pen, and taking the detainee to an area of the pen they cordoned off using shields.
In its decision dismissing the case announced on Thursday, local time, the military's top legal officers said the charges against the soldiers were being dropped because the video did not show abuse violent enough to merit a criminal conviction and had been improperly leaked to the media.
The decision added that the Palestinian victim had since been released back to Gaza, creating an "absence of certainty" he would be able to testify in a trial.
In November 2025, after much speculation about how the leaked video got out, Military Advocate General Yifat Tomer-Yerushalmi - the top legal official in the military - admitted she had approved its release, saying she had wanted to show how serious the abuse was and convince people the military had a duty to investigate.
Facing an uproar from Netanyahu's government, she abruptly resigned and then disappeared, only to be found phoneless on a Tel Aviv beach after a frantic search by authorities.
The phone, believed to hold possible evidence against her, was later recovered in the sea.
The Sde Teiman prison was set up after October 7, 2023, to hold Palestinians rounded up in Gaza during Israel's war against the Hamas militant group.
The secretive facility quickly gained notoriety as employees and Palestinians freed from detention described scenes of abuse and torture and Israeli rights groups petitioned the nation's top court for it to be shuttered.
Israel has long been accused of failing to hold its soldiers accountable for crimes committed against Palestinians.
The allegations have intensified during the war in Gaza. Israel says its forces act within military and international law and says it thoroughly investigates any alleged abuses.
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