Strauss-Kahn had been accused of sexually assaulting Sofitel Hotel maid Nafissatou Diallo in May.
In a 25-page motion filed with Judge Michael Obus, prosecutors said "evidence gathered in our post indictment investigation severely undermined her reliability as a witness in this case."
During the investigation into the incident, prosecutors say, Diallo presented three different versions of the alleged assault and lied under oath. Diallo's attorney says his client is "devastated" by the decision to abandon the criminal case.
Kenneth Thompson said he still believes there is sufficient physical evidence to overcome any doubts prosecutors have about the hotel maid's credibility. He told ABC News that Monday's meeting involving three prosecutors from the office of Manhattan District Attorney Cy Vance, Thompson and Diallo "was hostile."
"Joan Illuzzi basically told Ms. Diallo that they were dismissing the case, claiming because she lied to them," Thompson said. Strauss-Kahn had long maintained he was innocent of the charges.
"We have maintained from the beginning of this case that our client is innocent," Strauss-Kahn's lawyers, William W. Taylor and Benjamin Brafman, said in a statement. Mr. Strauss-Kahn and his family are grateful that the District Attorney's office took our concerns seriously and concluded on its own that this case cannot proceed further. "The Manhattan District Attorney has denied the right of a woman to get justice in a rape case. In the filing to disqualify Vance, Thompson said Vance "has sabotaged defendant Strauss-Kahn's prosecution." Thompson accused Vance's office of treating his client "abusively." Thompson also claimed the DA's office was predisposed to dismissing a case it once called "strong." New "bombshell" revelations about the hotel maid who accused Dominique Strauss-Kahn of attempted rape emerged Monday as prosecutors filed papers asking a judge to drop charges against the former chief of the International Monetary Fund.
Francois Hollande, a candidate who emerged as favourite during Strauss-Kahn's absence from the race, even said Monday that the former IMF chief's return "could be envisaged."
The accusation led Strauss-Kahn, then IMF managing director, to resign that position and abandon his bid to run against French President Nicolas Sarkozy, a political conservative. "The Manhattan district attorney, Cyrus Vance, has denied the right of a woman to get justice in a rape case," Thomson said as Diallo stood at this side. The physical evidence includes evidence that a sexual act had taken place, but Strauss-Kahn, through his lawyers, claimed that it had been consensual.
It was also determined that she lied to the grand jury that indicted Strauss-Kahn, saying she had cowered in fear in the hotel hallway following her encounter with Strauss-Kahn. Prosecutors determined that she had proceeded to clean another room, then returned to Strauss-Kahn's room after he had left - acts that Strauss-Kahn's defence team said did not suggest she was traumatized.
Once a leading contender for next year's presidential election, Strauss-Kahn will have to work to repair his image if he wants his political life back in France.
A likely first step would be working in the new administration if Strauss-Kahn's Socialist Party wins the presidency away from Nicolas Sarkozy.