"There was a lot of discrepancies, inconsistencies, and a lot of contradiction in the evidence that we felt we could not continue with the matter," spokesman Nathi Mncube told reporters outside the Boksburg Magistrate's Court.
"Our view is that there is no prospect of a successful prosecution and we thought it would be fair to withdraw the matter and allow the police to investigate."
Murder charges were withdrawn against Zanokuhle Mbatha during a brief court session on Tuesday. Mbatha was not in court.
His relatives, who had arrived in a minibus taxi, occupied the front row in the public gallery.
Prosecutor Getrude Market told the court there had been new information from investigators.
"Investigators are following up on the new information, and that may include future identity parades... we withdraw the matter as a result of new developments."
Mbatha was represented by a private lawyer Mxolisi Ndwandwe.
Mbatha's relatives sighed in relief after Magistrate Daniel Thulare told the court the 25-year-old was to be released immediately.
Mbatha's tearful mother was ushered out of the courtroom by relatives and metro police officers to a police minibus parked outside.
Lindi Mwandle, who said Mbatha was her brother-in-law, was jubilant.
"We are so happy he is coming home... the lawyer we appointed helped us through this mess. We have been saying that Zanokuhle is innocent," she said outside the court.
Meyiwa, also captain of Orlando Pirates, was killed in Vosloorus, Ekurhuleni, while visiting his singer and actress girlfriend Kelly Khumalo last month.
Two men allegedly entered the house on Oct 26 and demanded cellphones before shooting Meyiwa and running away.