A US judge on Tuesday dismissed sexual assault charges against former IMF chief Dominique Strauss-Kahn, but the French politician will not yet be able to leave pending an appeal.

After a sordid three-month legal saga that has captivated the world and turned French politics on its head, prosecutors said a hotel maid who accused Strauss-Kahn of forced sex had damaged her credibility beyond repair.

In a packed Manhattan courthouse, Judge Michael Obus agreed to drop all charges and dismissed a last-ditch attempt by the maid's lawyers to have a special prosecutor appointed.

But Strauss-Kahn still needs to wait until a higher court decides on the maid's appeal to appoint a special prosecutor. A decision was expected later Tuesday, although the court has up to 30 days to consider.

Strauss-Kahn, 62, looked visibly relieved as he left the building accompanied by millionaire French wife Anne Sinclair, who has stood firmly by his side ever since the sensational sex scandal erupted in May.

"This is the end of a terrible and unjust ordeal," Strauss-Kahn told reporters outside of his upscale temporary residence in Lower Manhattan

"I'm eager to return to my country, but first there are a few small things I need to do before leaving," Strauss-Kahn said, pledging: "I'll express myself at greater length once I'm back in France."

Strauss-Kahn said he was "relieved" for his wife, children and "everyone who has supported me at this time by sending me letters and emails."

"They should know that their support has been very significant," he said. In a separate written statement, the one-time front-runner for the French presidency called the legal saga a "nightmare."

Even if he returns to France, Strauss-Kahn's reputation has been badly sullied by an affair that forced him to resign as head of the International Monetary Fund and put his French presidential dreams on hold.

Demonstrators, many of them women, hurled slogans outside of the courtroom. One, referring to Strauss-Kahn by the initials by which he is known in France, shouted: "DSK, you're a sick bastard and your wife is even sicker."

Prosecutor Joan Illuzzi-Orbon said she did not take the decision to drop the sex crime charges "lightly."

"The defendant engaged in a horrid sexual encounter with the defendant," she said, but added: "The case rises or falls on her testimony."

The accuser, 32-year-old chambermaid Nafissatou Diallo, "severely undermined her reliability as a witness in this case," she said.

Kenneth Thompson, a lawyer for the Guinean immigrant, vowed to pursue a civil case and had harsh words for Manhattan's top elected prosecutor, District Attorney Cyrus Vance.

Vance "abandoned an innocent women and denied the right to justice in a rape case," Thompson told reporters, saying that the district attorney "turned his back" on forensic, medical and other physical evidence.

The sensational case garnered world attention on May 14 when Strauss-Kahn was escorted by New York police from his first class seat on an Air France plane moments before its departure for Paris.

As pictures of the respected international banker, shackled and unshaven, were beamed around the globe, it emerged that he stood accused of the brutal attempted rape of a hotel chambermaid in his plush Manhattan suite.

The case began to unravel weeks later when prosecutors announced that Diallo had been caught lying on her asylum application form, including about a gang rape she had suffered back home in Guinea.

In addition, she was said to have discussed Strauss-Kahn's wealth in a telephone conversation with a Guinean friend currently held in a US prison, and to have changed sworn testimony to the grand jury considering the case.

In their 25-page motion filed on Monday asking the judge to dismiss all charges, prosecutors said "their cumulative effect would be devastating."

Diallo was "persistently, and at times inexplicably, untruthful in describing matters of both great and small significance," they said.

"The nature and number of the complainant’s falsehoods leave us unable to credit her version of events beyond a reasonable doubt, whatever the truth may be about the encounter" at the hotel.

Although there was initial forensic and medical evidence that suggested a forcible encounter, the assistant district attorneys handling the case, Illuzzi-Orbon and John McConnell, said their motion made no factual findings.

"We simply no longer have confidence beyond a reasonable doubt that the defendant is guilty," they said.

In a "he-said, she-said" case, a jury needs to be convinced beyond a reasonable doubt and, legal experts say, Diallo's credibility on the witness stand was likely to have been weakened beyond repair.

Diallo, wearing black trousers and a beige jacket, and accompanied by several hulking private security guards, said nothing after the case.

In an interview last month, Diallo recounted the incident, saying Strauss-Kahn emerged naked from a shower to "grab my breasts" and despite her pleas, forced her head down to his penis.

He could now in theory return to frontline French politics, but no one back in France is expecting a prominent role.

"I don't think he can hope for a center stage role in French politics now," said political scientist Gerard Grunberg of the prestigious Sciences-Po school in Paris.

"His public image is much deteriorated and the Socialist Party and its leaders must be mad at him for having missed this moment of opportunity. Neither the public nor the party want to see him back on the frontline."

His legal travails are also far from over.

Diallo has filed a civil suit seeking unspecified damages against Strauss-Kahn. And in another case back in France, 32-year-old writer Tristane Banon has filed a complaint alleging the Socialist politician tried to rape her after luring her to a Paris flat in 2003.

Strauss-Kahn has announced his intention to sue Banon for defamation, alleging she invented the story to help publicize her writing.