On Wednesday, Cape and Island District Attorney Michael O'Keefe said in court documents that they were dropping the charge "due to an unavailability of the complaining witness".
Spacey had been accused of groping an 18-year-old busboy at the Club Car restaurant in July 2016.
The attorney for the alleged victim said in a statement that "my client and his family have shown an enormous amount of courage under hard circumstances", and declined further comment.
Spacey, who won an Academy Award in 2000 for his role in "American Beauty", had pleaded not guilty to the charge.
Spacey's lawyers had previously accused the man of deleting text messages that would support his defense.
The fatal blow to the case happened during an evidentiary hearing as the defense was grilling the accuser about the cellphone he was using on the night he said he was assaulted.
Prosecutors charged Spacey in the Nantucket case in December.
The case began to fall apart after the alleged victim chose to stop testifying, invoking the 5th Amendment on the witness stand last week. Garabedian said he would have no further comment.
The case was crippled after the accuser refused to testify about text messages the defense claims were deleted, invoking his Fifth Amendment right against self-incrimination. But just one week later, the lawsuit was dropped "with prejudice", meaning it can not be refiled.
Spacey's accuser sued on June 26, but dropped the lawsuit a week later ahead of a July 8 hearing in Nantucket District Court regarding his phone, which his lawyer said he could not find after being ordered to turn it over to Spacey's attorneys.
The man told police he went over to talk to Spacey after his shift because he wanted to get a picture with the former "House of Cards" star. He said Spacey bought him several drinks and tried to persuade him to come home with him before unzipping the man's trousers and groping him for about three minutes. He said that he fled when Spacey went to the bathroom.
Earlier this month, Variety, the entertainment news outlet, reported that British police detectives traveled to the United States in May to interview Spacey about six sexual assault allegations against the actor, who ran London's Old Vic Theatre between 2004 and 2015.
Spacey was cut from the show's final season amid the wave of accusations.