Chatchom Akapin, the department's director of global 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.
Public prosecutor Settha Thianpilakul from the foreign affairs bureau of the Office of the Attorney-General arrived at the court on Ratchadaphisek Road on Monday afternoon to withdraw prosecutors' earlier request for the extradition of the 25-year-old Bahraini footballer.
Al-Araibi, a refugee who lives and plays for Melbourne-based Pascoe Vale in Australia, has been held in Thailand since November at the request of Bahrain after being arrested in Bangkok while on honeymoon.
The player's Australia lawyer Latifa Al-Haouli of Sabelberg Morcos Lawyers, told SBS News on Monday legal staff were working with Thailand's department of corrections to secure Mr Al-Araibi's release imminently.
Aladdin Grammys trailer gives first look at Will Smith as blue Genie
Is it even possible to live up to the expectations for that character? Just saw the #Aladdin preview. But we'll all get the full picture this summer, when Aladdin premieres in theaters on May 24th.
Western Sydney Wanderers have thrown their support behind detained refugee Hakeem Al-Araibi by removing a Thai Airways sponsorship board from their stadium.
He was later sentenced in absentia to 10 years in jail over an act of vandalism he maintains he could not have committed because he was playing in a televised football match. He says he faces torture if returned to Bahrain.
Morrison said he was "pleased" with the outcome and thanked the Thai government, as well as Australian football identity Craig Foster for his advocacy on the case. "It is a commitment enshrined in our human rights policy", he said.
She said she requested his release on bail but it was denied because the court deemed him a flight risk.