The case of Nie Shubin, who was 20 years old when he faced a firing squad in 1995 after being convicted of rape and murder, is the latest miscarriage of justice in the Communist-ruled country.
"The Supreme People's Court believes that the facts used in the original trial were unclear and the evidence insufficient, and so changes the original sentence to one of innocence," it said in a statement on a verified social media account.
Executed Chinese teenager found innocent 18 years on
Chinese courts have a conviction rate of 99.92 per cent, and concerns over wrongful verdicts are fuelled by police reliance on forced confessions and the lack of effective defence in criminal trials.
Overseas rights groups say China executes more people than any other country, but Beijing does not give figures on the death penalty, regarding the statistics as state secrets.
Nie was convicted of raping and murdering a woman whose body was discovered by her father in a corn field on the outskirts of Shijiazhuang city, in the northern province of Hebei.
But the time, method and motive for the murder could not be confirmed, and key documents related to witnesses and the defendant's testimony were missing, the supreme court said.
The "primary evidence was that Nie Shubin's confession of guilt corroborated the other evidence", but "there are doubts over the truth and legality of his confession of guilt", the statement added.
Nie's family had been campaigning for justice since a serial murderer arrested in 2005 confessed to the killing. But the case was only formally reopened in 2014.
"Thanks to all those who helped on Nie Shubin's case!" his mother, Zhang Huanzhi, 72, said on social media.
The Hebei high court, which convicted and executed Nie, "expressed deep, deep regrets" to his relatives and would investigate "possible illegal problems related to the trial" soon, according to state broadcaster CCTV.
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