The state court in Schleswig ruled on Thursday that there was no reason to believe Catalonia's former leader Carles Puigdemont risked persecution in Spain.
Puigdemont was convicted in multiple cases of corruption, conducting an unsanctioned independence referendum and to rebel against the rebellious against the ruling government.
Puigdemont was imprisoned in Neumünster after being arrested at his entry to Germany through the border with Denmark, following an order given by the court of that city to keep him in prison and avoid his escape. Proceedings to decide whether to grant extradition on corruption charges may continue, however.
A Spanish government spokeswoman said earlier that Spain respects the German court's decision.
Spain had sought Puigdemont's extradition from Germany after a Spanish Supreme Court judge charged the 55 year-old politician with rebellion and misuse of public funds.
The charge of misuse of public funds remains possible as grounds for extradition, the judges said, but the more serious charge of rebellion was ruled inadmissible as German law deems violence necessary for such an offence to have been committed.
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A Spanish official says the government respects judicial decisions "always, when it likes them and when it doesn't".
Sanchez said in a letter from a Madrid jail published Thursday that he was ready to try again to be elected.
The ex-police chief - who was credited for the force's swift response in the 2017 Barcelona terror attacks - resigned a year ago in the aftermath of the referendum. The charge of rebellion is totally invalid.
The judge also said Catalan regional police did not respond to requests for aid made by officers from Spain's Guardia Civil force who were searching a Catalan government building in Barcelona on September 20 as part of a probe into preparations for the banned referendum.
The Spanish government's quelling of the October 1 independence referendum drew global condemnation and outrage, with footage of national police officers and members of the Civil Guardia seizing ballot boxes and violently dispersing voters going viral on social media.
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