In the dismissal document, prosecutors say they will not be able to produce a key witness at trial.
Oates was charged in the death of Duke University graduate student Abhijit Mahato. In January 2008, Mahato was found dead inside his Durham apartment just blocks from Duke's campus.
Co-defendant Lawrence Lovette, Jr. - who was convicted in the Eve Carson murder - remains charged in the Mahato case.
But, Oates' lawyers have said there was no physical evidence linking Oates to Mahato's death.
According to the attorney for Oates who spoke with ABC11 Friday, evidence developed during the Eve Carson murder case by federal investigators led to a new witness that showed Oates was not involved in Mahato's murder.
The witness told federal investigators that Lovette and another unidentified person are connected with the crime.
During the Carson investigation, police found an iPod, cellphone and other items belonging to Mahato in Lovette's possession, linking him to the crime.
A witness claimed to have overheard co-defendant Lawrence Lovette, Jr. admit to kidnapping Mahato with the help of another man, forcing the grad student to make ATM withdrawals and then returning to his apartment where he was shot and killed.
The case was very similar to Carson's. The UNC student body president was also forced to make withdrawals before she was shot to death and dumped along a street.
Oates has been out of jail since last May. He still has weapons charges pending in Durham County.