Last month, police opened a criminal narcotics case after Konnova bought diazepam rectal gel -- which is not legally available in Russia -- to treat her six-year-old son Arseny who was having epileptic seizures.
Diazepam rectal gel tubes are widely used in the West to treat seizures and anxiety.
The medication is available in ampoules in Russia, while gel tubes -- which are more convenient to administer and cause no pain -- are not licensed in the country.
Moscow police detained her during a sting operation when she tried to sell several tubes she no longer needed.
If convicted, Konnova faced between four and eight years in prison for drug dealing.
Charity workers said that if she went to prison, her elder son would go to an orphanage, while her younger son would be sent to a care home for the disabled. They said he risked dying there because of a lack of special treatment.
Arseny was born without an oesophagus and suffers from numerous illnesses including cerebral palsy.
An interior ministry spokeswoman said the case against Konnova had been dropped.
And Interior Minister Vladimir Kolokoltsev tasked police officials with carefully looking into "all the circumstances" of the case.
The announcement came shortly after Kremlin spokesman Dmitry Peskov cautioned against blindly following the letter of the law in such a case.
Speaking to AFP, Konnova said she was overjoyed and burst into tears.
"It's my birthday today," she said.
"This is the best gift ever. I am free."
Her case horrified charity workers and doctors as well as thousands of parents of children with epilepsy.
Amnesty International said the case "exemplifies the inhumanity of the Russian criminal justice system, which prioritises drug-busting statistics ahead of the dignity of the human person."
Most modern anti-epilepsy drugs for children are not registered in Russia, forcing parents to buy them abroad or purchase them illegally on the black market.
Nyuta Federmesser, a respected public figure who supports Russian hospices, said the announcement was a rare victory for civil society in Russia.
But she added it was "very important to see a huge problem behind this case -- the lack of necessary medication for children."