Germany has dropped a request to the US to extradite 13 suspected CIA agents accused of abducting a German citizen, officials and media reports say.
Mr Masri is seeking damages in the United States
A justice ministry official reportedly confirmed an article in the German weekly Der Spiegel that said the US had refused the extradition request.
A Munich court had ordered arrest warrants for 13 people in January.
The citizen, Khaled al-Masri, says he was abducted in Macedonia in 2003 and flown to Afghanistan for interrogation.
A spokeswoman for the justice ministry in Berlin told the Associated Press news agency Germany had decided against passing on to US authorities the extradition demand of the prosecutors in Munich.
Der Spiegel reported that Berlin had decided not to proceed in order to "avoid an open conflict with the American authorities".
US justice department spokesman Andrew Ames told AP it did "not discuss whether it has or has not received an extradition request from a given country or our communication with any country with respect to such requests".
"Mr Masri has pursued litigation for civil damages here in the US and this litigation is ongoing," he said.
"To date, US courts have barred his suit based on the US government's assertion of state secrecy concerns."
Mr Masri says he was kidnapped in Macedonia in 2003, flown to a secret jail in Afghanistan and tortured there.
He says he was detained for five months before being released in Albania after the Americans realised they had got the wrong man.
Mr Masri, who is Lebanese-born, said his case was an example of the US practice of flying foreign terror suspects to third countries without judicial process for interrogation or detention.
He told the BBC in February: "I'm suffering from stress - this experience has left me traumatised."
He was arrested in May 2007 on suspicion of setting fire to a shop in Bavaria.
His German lawyer, Manfred Gnjidic, said Mr Masri had acted out of desperation after arguing with staff at the shop in Neu-Ulm.