The judge ruled early on Thursday that there was insufficient reason to arrest Mr Lee over accusations of bribery, embezzlement and perjury.
Mr Lee had been waiting for the ruling overnight since a hearing on Wednesday.
The allegations were part of a corruption scandal which led parliament to impeach President Park Geun-hye.
Samsung, which has consistently denied any wrongdoing, said in a statement that the "merits of this case can now be determined without the need for detention".
President Park is accused of abusing her position by colluding with a close friend, Choi Soon-sil, to use their relationship to secure millions of dollars from major companies. The money was allegedly paid into Ms Choi`s non-profit foundations in exchange for favourable government treatment.
Prosecutors allege that Samsung paid 43bn won ($36.3m; £29.8m) to secure government support for a controversial merger of two of its affiliates.
Samsung has acknowledged making the payments but insists it did not expect anything in return.
South Korea`s special prosecutors had declared Mr Lee a criminal suspect and made a formal request for an arrest warrant earlier this week.
South Korea: Court denies arrest warrant for Samsung chief
19 January 2017
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A court in South Korea has refused a request by prosecutors to issue an arrest warrant for Samsung chief Lee Jae-yong.
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