Prosecutor Karim Khan said his office had concluded there were "no longer any reasonable prospects of conviction at trial even if the charges were confirmed."
Mokom had faced charges of war crimes and crimes against humanity over alleged atrocities committed against Muslim civilians in the CAR, a former French colony, by his self-proclaimed self-defence militias in 2013 and 2014.
One of the poorest countries in the world, the CAR was plunged into bloody sectarian conflict after Seleka rebels, a coalition of armed groups mainly composed of Muslims, ousted president Francois Bozize in early 2013.
Mokom's militias, which called themselves "anti-Balaka" —meaning "anti-machete" — were formed in reaction to the takeover of the capital, Bangui, by the Seleka.
He had denied involvement in the bloodshed, telling ICC judges in August that he was "dedicated to the search for peace."
Prosecutor Khan said the decision to drop all charges was based after considering all the evidence and "changed circumstances regarding the availability of witnesses."
"I am very conscious that this news may be unwelcome to many survivors and their families," Khan said.
"I hope many will understand my legal and ethical responsibilities to be guided by the law and the evidence," he added