Ilknur Caliskan, 47, had been due to face a Supreme Court murder trial in March over the death of her husband on September 30, 2023.
The 50-year-old man was found with stab wounds inside a car at Colbinane, an hour north of Melbourne, about 11.30pm and paramedics tried to save him but he died at the scene.
Ms Caliskan had been freed on bail in April 2024 to be assessed for a sleeping disorder by a specialist in Sydney and prosecutors received the expert's report in November.
Prosecutor Nadia Deltondo told the bail hearing the case was "unique" as her defence, of parasomnia, was not something that regularly came before the courts.
Parasomnia is another term for a sleeping disorder, which can include sleepwalking and sleep terrors.
After the sleep study report came back, defence barrister Daniel Sala questioned the strength of the prosecution's case because the expert found Ms Caliskan may have been acting involuntarily due to her sleep disorder.
A key issue for prosectors would be to prove Ms Caliskan had acted in a "conscious and voluntary state" when the stabbing occurred, due to the sleep disorder, the court was told in November 2024.
"I ask the Crown how they're going to close this case to a jury," Mr Sala told the court on November 26.
"The director is ultimately the one who has the discretion to prosecute or not," Judicial Register Tim Freeman said.
Prosecutors in January told another directions hearing that they were seeking the views of the deceased's relatives in Turkey before they could make a decision on the case.
The case returned on Tuesday, where prosecutor Daryl Brown announced the Director of Public Prosecutions had decided to discontinue their case against Ms Caliskan.
Ms Caliskan did not attend the hearing and is now a free woman.
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