Following the landmark decision, Bibi will finally be able to join her daughters who earlier fled to Canada where they have been given asylum.
Bibi's lawyer, Saiful Malook, who returned to Islamabad after fleeing the country amid death threats, called the decision a victory for Pakistan's constitution and rule of law. The three-judge Supreme Court panel had "insisted on very strict proofs of blasphemy" and found none, he said.
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Pakistan's Chief Justice Asif Saeed Khan Khosa who led the panel of judges dismissed the petition filed by radical religious leaders. The extremists had petitioned the court to overturn its acquittal and send her back to prison for execution. He said in court that Bibi's accusers were guilty of perjury and if the case had not been so sensitive, they should have been jailed for life.
"The image of Islam we are showing to the world gives me much grief and sorrow," Khosa said.
Bibi, who spent eight years on death row and who has been under guard at a secret location since her acquittal last October, was overjoyed at the news, which she heard over the TV.
"I am really gratefully to everybody, now after nine years it is confirmed that I am free and I will be going to hug my daughters," a friend quoted Bibi as saying. The friend spoke to the Associated Press on condition of anonymity fearing for his own safety.
Following her October acquittal, radical religious parties took to the streets to protest, calling for the killing of judges who acquitted Bibi and for the overthrow of Prime Minister Imran Khan's government. They also filed the last-minute appeal for a review of the Supreme Court acquittal.
The protests were spearheaded by the radical Tehreek-e-Labbaik party, whose single point agenda is protection of Islam and the Prophet Muhammad.
Bibi's case goes to the core of one of Pakistan's most controversial issues — the blasphemy law, often used to settle scores or intimidate followers of minority religions, including minority Shiite Muslims. A charge of insulting Islam can bring the death penalty.
But the accusation on its own is sometimes enough to whip up vengeful mobs, even if the courts acquit defendants. A provincial governor who defended Bibi was shot and killed, as was a government minority minister who dared question the blasphemy law.
Bibi's ordeal began on a hot day in 2009 when she brought water to fellow farmhands who refused to drink from the same container as a Christian woman. Two of her fellow farmworkers argued with Bibi and later accused her of insulting Islam's prophet.