Crown prosecutor Michele Williams SC asked that the charge against Mr Dale for the 2004 murder of police informant Terence Hodson be withdrawn during a hearing at the Melbourne Magistrates Court on Friday.
A second man, who cannot be named, who was also charged with murder over the death, also had his charge withdrawn.
"I seek leave your honour to withdraw charges against both defendants in this matter," Ms Williams said.
"We do so because the director (of public prosecutions) reviewing available material has come to the conclusion that evidence available is insufficient to support a conviction.
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"There are constraints about what we can say about the matter."
The former drug squad detective was in court for Friday's hearing and made no expression when the announcement was made.
