The decision was made by Judge Felix Catena. Hillary waived his right to a jury trial and requested a bench trial.
Garrett's younger brother, Aaron Collins, burst into tears after the judge announced his decision, and Garrett's mother, Tandy Cyrus, cried softly. Hillary embraced his attorneys and left the courtroom shortly after the decision was announced.
First responders took two stretchers to the courthouse after the verdict to assist distressed family members, including Garrett's cousin Kayla Phillips, who is believed to be one of the last people who saw him alive. Kayla, who appeared distraught, was then escorted down the courthouse steps and to a waiting car.
In a press conference after the verdict, Hillary's lawyers praised the "system" for working.
"Nick knew he was innocent and had faith in the system," said attorney Norm Siegel. "This chapter ... ends on a positive note."
Speaking to ABC News shortly afterward, Hillary said he felt he was "robbed" of being able to grieve Garrett's death because he said he had to almost immediately take on a survival mindset when police seemed to focus on him as a suspect.
He added that he wished he could have been more of a comfort to Cyrus and Aaron. "I continue to pray for the family," he said.
Garrett had just begun the sixth grade when he was found unresponsive in his Potsdam home in October 2011. Cyrus had dated Hillary for about one year, and the two broke up months before Garrett's death.
Hillary was arrested several years after Garrett's death, and the case went to trial this September in Canton, New York, a town about 10 miles from Potsdam.
"I have absolutely nothing to do with what has happened to Garrett," Hillary said. "Why would I even want to hurt a child, after having worked with kids for over two decades? It just blows my mind."
Hillary, a father of five, was smiling and laughing with his lawyers before the verdict was read. Afterward, he cried tears of happiness.
As he prepared for trial, Hillary told Vargas earlier this year that he tried to keep his children "in as much as a normal setting, but obviously it’s impossible."
"The one good thing to always hear [was my teenage daughter] Shanna come home and say, 'You know, Dad, you know, all my friends who know who you are, who have been to the house, who have interacted with you, they are very supportive of you.'"
Hillary said he had to sit down with his children "and let them know, 'Look, your dad has absolutely nothing to do with the death of Garrett Phillips' ... My kids look back at me and [say], 'Dad, we know that’s not who you are.'"
Hillary told Vargas that he believes the killer "is still out there."
Hillary told "20/20" this year, "For them [the police] to have abused their power, because that’s what they did, they totally abused their power, to humiliate me and shame me. I wanted and still do to make certain that they will not do that to any other human being, regardless of the color of their skin, black or white, going forward."
In their answer to Hillary's lawsuit, police have denied all his allegations. The suit is pending and is now expected to move to trial following the completion of the criminal trial.
John Conger, 22, works at a bagel shop in Canton, down the street from the courthouse. Business has gone "through the roof" during Hillary's trial, he said.
Conger himself is familiar with the case as he grew up in a town near where some of Garrett's family is from. He said everyone there rallied behind the Phillips family after Garrett's death. "Everyone wanted to find out what happened," he said. "Everyone knew what was happening every step of the way for the last few years."
While Conger said he personally "didn't know enough to pick a side" in Hillary's guilt or innocence, he said he's "not surprised" by the verdict.
He said he thinks police and prosecutors "didn't have enough to really pin anything on anybody. It's just not much to go off of as far as evidence for who did it."
He added: "Hopefully they can find somebody. I think that would help the Phillips family out, to have some kind of closure."
The morning's verdict news quickly traveled from Canton to Potsdam. Maggie McKernan, 22, has lived in the Potsdam area her whole life.
Like Conger, she didn't have an opinion on Hillary's guilt or innocence, but she said "a lot of people from the [local] colleges really stood behind" Hillary.
He coached soccer at the local Clarkson University, and attended and played soccer at the nearby St. Lawrence University.
"I think that speaks a lot about his character," McKernan said.
But she added, "If I were him I'd probably want to move away from all of this. That stigma -- it's a small enough town -- it's definitely going to follow him around if he decides to stay here for the rest of his life."
Follow along with ABC News' coverage of the Nick Hillary trial here: