Prosecutor Neil Braithwaite had submitted a motion to drop the case after a jury had already been picked and a retrial scheduled for the two defendants.
"The Travolta family has said that this matter has caused them unbelievable stress and pain and they wish to put this whole thing behind them," Braithwaite said.
Ambulance driver Tarino Lightbourne and his attorney, politician Pleasant Bridgewater, were accused of threatening to release private information about the January 2009 death of Travolta's 16-year-old son Jett at the family vacation home in Grand Bahama.
Lightbourne, who was among the medics who treated Jett, allegedly sought $25 million from the actor with the assistance of Bridgewater, who resigned her seat in the Bahamas Senate after she was charged in the case.
A judge declared a mistrial in October after a Bahamian lawmaker suggested the still-deliberating jury had acquitted one of the suspects.
Travolta had testified during that trial and one of his attorneys said in October that he had been prepared to testify again if necessary. But the actor said Monday that the delay in prosecuting the case had prompted his decision not to take the stand again
"The long-pending status of this matter continued to take a heavy emotional toll on my family, causing us to conclude that it was finally time to put this matter behind us," he said in a statement to The Associated Press. Therefore, after much reflection I concluded that it was in my family's best interest for me not to voluntarily return to The Bahamas to testify a second time at trial."