Sinclair, 51, has pleaded not guilty to eight criminal charges including forcible sodomy, indecent acts, violating orders and conduct unbecoming an officer. He faces a maximum sentence of life in prison at a court-martial that was scheduled to begin March 3.
The married father of three has admitted to having an extramarital affair with a female captain under his command, but maintains the relationship was consensual. Sinclair's defense has portrayed the woman as a jealous ex-lover and challenged her testimony - asking that she be charged with perjury after questions were raised about evidence she said she found on a cell phone.
In a statement to ABC11, Sinclair's lawyer Richard Scheff said it was clear that lead prosecutor Lt. Col. William Helixon had questions about the accuser's credibility and honesty.
"We greatly respect LTC Helixon, whose track record as a prosecutor is exemplary and unimpeachable. We've consistently tried to resolve this matter on behalf of our client, who is a war hero. Until now, our efforts have been met with silence. If the Army is changing its view of this case, we welcome it. If not, we remain disappointed that politics, rather than fairness and justice, is driving the decision making," said Scheff.
Fort Bragg officials told the New York Times that Helixon voluntarily left the case for "personal reasons."
Sinclair has reportedly offered to plead guilty to some of the less serious charges against him. An admission of adultery alone would almost certainly end his 28-year Army career - as adultery is a crime under military law. Fort Bragg officials rejected the plea offer in December.
As deputy commander of the 82nd Airborne, Sinclair oversaw 22,000 troops until he was abruptly sent home from Afghanistan last year and criminally charged.
The case has made national news as the military has faced accusations that it not done enough about sexual assault cases in its ranks.
Fort Bragg officials have not said if the latest developments in the case could mean a delay. The case is still currently set to go to court in March.