"It would be unjust to resume the prosecution," the judge said in a statement, according to the newspaper, based in Allentown.
In June, Banach had found Snuka, 73, incompetent to stand trial.
Snuka's attorney and prosecutors in the case could not immediately be reached for comment late on Tuesday.
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"We are considering our options and will decide at the appropriate time what actions we will take," the Lehigh County District Attorney's Office said in a statement about the judge's decision, The Morning Call reported.
Snuka was charged in 2015 with third-degree murder and involuntary manslaughter in the death of Nancy Argentino, 23, who, prosecutors said, was found with head injuries in their shared motel room in Allentown, shortly before she died.
In the lead-up to the filing of criminal charges, a county grand jury found Snuka had assaulted Argentino and then left her in bed to die, the paper said.
The Fiji-born Snuka was scheduled to attend a court hearing last month but was too sick to travel from Florida to appear in person, the paper added.
At last month's hearing, his attorney showed the judge a doctor's note indicating Snuka was in hospice care and had six months to live, and on Tuesday he said Snuka was suffering from a serious infection, the paper said.
A defence expert last year testified that Snuka could no longer recognise family members and he believed police officers who arrested him were actually fans seeking an autograph, the paper said.
In the 1980s, Snuka was a World Wrestling Federation star, along with Hulk Hogan, Roddy Piper and Andre the Giant. He was known for climbing to the top rope and diving onto the chest of a prone opponent.
(Reporting by Alex Dobuzinskis in Los Angeles; Editing by Clarence Fernandez)
