Andrea Yates drowned the children, aged 6 months to 7 years, in the bathtub of her Houston home five years ago.
The decision means Yates, 42, will go to a state mental hospital for treatment until a judge decides she is sane enough to be released, a process which could take years.
Yates, who is being treated with anti-psychotic drugs, looked stunned and tears welled up in her eyes when the verdict was read.
She was found guilty in a 2002 trial and sentenced to life in prison for the crime but had to retried because the conviction was overturned due to flawed testimony.
The jury of six men and six women began deliberations on Monday and reaching their verdict this morning.
Yates had a history of mental illness and suicide attempts when, on June 20, 2001, she drowned Noah, 7, John, 5, Paul, 3, Luke, 2, and Mary, six months, one by one in the family bathtub.
At the time the deaths her husband Rusty Yates was at his job at NASA's Johnson Space Center.
Witnesses for the defence said Yates suffered from a delusion induced by postpartum psychosis that drowning the children would spare them from damnation.
Prosecutors agreed that Yates was sick but said she was sane enough to know killing the children was wrong.
The case became a cause celebre for women's groups and mental health advocates, who said postpartum depression was inadequately treated in many cases.