The prosecution claimed the two men masterminded covert operations that led to ethnic cleansing in Bosnia and Croatia during the 1990s Balkan wars, following the breakup of the former Yugoslavia.
Judges said Croatian leaders, including the late Croatian President Franjo Tudjman, were complicit in plans to create a Croatian mini-state in Bosnia.
But the Hague court’s three-judge panel ruled Thursday that while Serb fighters did commit crimes in both countries, there was not enough evidence to link the two men directly to them. Two of the three said they were unable to conclude the men deliberately plotted to carry out a criminal plan to drive non-Serbs out of Bosnia and Croatia.
Prosecutors can appeal the acquittals.
The tribunal has held almost two decades of trials related to the Balkans conflict, in which Serbia often has been portrayed as the aggressor. But so far no official from Belgrade is serving a sentence related to war crimes in Croatia and Bosnia. Milosevic, who also went on trial in The Hague, died before his sentencing.
Three months ago, the court also acquitted the former chief of the Yugoslav National Army, who was accused of involvement in atrocities in Croatia committed by rebel Serbs.
In a separate case this week, the court sentenced a former Bosnian Croat leader to 25 years in prison on ethnic cleansing charges that included murder, rape and the expulsion of Muslims from Bosnia during the conflict. Five others received jail terms of between 10-20 years.