Chief Magistrate Howard Riddle cleared the 31-year-old Chelsea skipper at the end of a five-day trial at Westminster Magistrates' Court in London.
Riddle said the case was not about whether Terry was "a racist in the broadest sense of the word".
He said he had heard a great deal of evidence to show that he was not. "It is understandable why Mr Terry wants to make this point; his reputation is at stake."
The trial focused on words spoken by the defender during a heated altercation with Ferdinand, 27, following a penalty appeal in a match last Oct 23.
Footage of the exchange was seen by more than two million Sky viewers, and uploaded to YouTube, but the exact content of the conversation could not be ascertained conclusively.
Ferdinand himself had not complained of racial abuse. The investigation began following a single complaint made by an off-duty police officer watching the game on TV.
Ferdinand had not heard the words spoken by Terry, and only saw footage about one hour after the game on YouTube.