A spokeswoman for District Attorney Larry Chisolm said he still plans to prosecute McLeod on two misdemeanor charges, attempted stalking and disorderly conduct, in a lower court.
McLeod has been jailed since Aug. 4 after police arrested him twice over the summer on nearby Tybee Island, where 16-year-old Cyrus was filming the movie "The Last Song."
Police say McLeod told them he was engaged to marry the "Hannah Montana" star and resisted being escorted from the movie set.
James Byrne, McLeod's attorney, said he felt "vindicated, a little bit" by the grand jury's refusal to indict. Byrne said he suspects McLeod may suffer from mental delusions, but never posed a threat to Cyrus.
"The grand jury showed some common sense, which no one else in this case seems to have, which is there's nothing to these charges," Byrne said. "He didn't stalk anyone, he didn't threaten anyone. He acted strangely, and that's why he's in jail."
McLeod initially was charged with only misdemeanors, but prosecutors had his case transferred to Superior Court last month so they could pursue a felony charge of obstruction of a police officer. They said he tried to head butt an officer who tried to lead him away, but the grand jury rejected it as a felony case.
Lydia Sermons, a spokeswoman for Chisolm's office, said prosecutors agreed with the grand jury's decision and decided to proceed with the misdemeanor charges.
McLeod remained jailed Wednesday on $55,200 bond, which Byrne says the unemployed assistant plumber and his family can't afford. Byrne said he planned to ask a judge to lower McLeod's bond once the misdemeanor charges are refiled.