The 25-year-old will be released from prison shortly, with the Thai attorney-general's office confirming Bahrain had requested the case be dropped.
Al-Araibi was originally wanted by Bahrain over the vandalising of a police station in 2012.
Chatchom Akapin, the department's director of international affairs, said the decision was made under Section 21 of the Prosecution Act which allows for cases to be dropped if they are not in the public interest.
"We had a phone call from the Foreign Affairs Ministry this morning and they said Bahrain doesn't want him anymore," Chatchom told BBC.
Former Socceroos captain and SBS chief football analyst Craig Foster voiced his support for Al-Araibi throughout his time in prison and took to Twitter to thank the Thai Government.
"Thanks go to the wonderful people of Thailand for your support and to Thai Government for upholding international law," Foster said.
