Blackwater guards are accused of firing on civilians in the 2007 incident
US prosecutors have asked for charges against one of five Blackwater security guards accused of killing up to 17 unarmed Iraqi civilians to be dropped.
No reason was given for the move to dismiss charges against Nicholas Slatten, of Tennessee.
But prosecutors left open the option of reinstating proceedings at a later date.
Four other men are due to face trial in February over the 16 September 2007 incident in the Iraqi capital.
A sixth pleaded guilty and agreed to co-operate with prosecutors.
The killings - which strained Iraq-US relations - took place when Blackwater guards opened fire in Baghdad's Nisoor Square while escorting an American diplomatic convoy.
The firm says its guards were acting in self-defence but witnesses and relatives of those killed maintain that the shooting was unprovoked.
The US says 14 people were killed but an Iraqi investigation put the number at 17. Children were among those killed, and several people were wounded.
Iraq later withdrew Blackwater's licence to operate within its borders and the US government stopped using the firm to guard its diplomats in Iraq.
Blackwater has changed its name to Xe Services.