Naser Oric was convicted on two counts of failing to prevent murder and cruel treatment, but was acquitted of four counts of failing to discharge his duties and the destruction of towns and villages.
He was sentenced to two years in jail, but Judge Carmel Agius ordered his release as he had been in custody since April 2003 for time already served.
Oric had pleaded not guilty to six charges of war crimes, including murder and cruel treatment of Bosnian Serbs in 1992-93.
He was in charge of forces which beat and killed Serb prisoners and torched Bosnian Serb villages.
The prosecution, which requested a sentence of 18 years, expressed "surprise."
"We will consider whether or not to appeal only after we study the full text of the judgement," said spokesman Anton Nikiforov.
Serbs, who see Oric as the mastermind behind violent raids carried out on Serb villages in Srebrenica, slammed the court's ruling.
"The sentence is deeply harming the credibility of the UN war crimes court," Bosnian Foreign Minister Mladen Ivanic, who is a Serb, told AFP.
Srebrenica, a Bosnian Muslim enclave in eastern Bosnia, later became a byword for mass murder after Serb forces overran the town in July 1995 and massacred up to 8,000 Muslim men and boys in Europe's worst atrocity since World War Two.
Oric is one of at least half a dozen Bosnian Muslims to have been indicted by the UN war crimes tribunal in The Hague.
His arrest marked a milestone for the court, which has faced accusations by Serbs that it is biased against them.