British National Party (BNP) leader Nick Griffin and activist Mark Collett have been found not guilty of inciting racial hatred.
The jury in their trial in Leeds crown court unanimously found the pair not guilty of six charges.
In the wake of the decision, chancellor Gordon Brown said the law might need to be "looked at".
Mr Griffin, 47, of Llanerfyl, Powys faced two charges for inciting racial hatred and Mr Collett, 26, of Swithland Lane, Rothley, faced four similar offences.
The pair were charged in April 2005 following the release of BBC documentary The Secret Agent, secretly-filmed in 2004.
After viewing footage - which showed speeches where Mr Griffin described Islam as a "wicked, vicious faith" and Mr Collett said "let's show these ethnics the door in 2004" - the jury found both defendants not guilty.
Before retiring to consider its verdict, judge Norman Jones stressed to the jury that the BNP was not on trial and that the crime the defendants stood accused of was racial, not religious, hatred.
"This is not about whether the political beliefs of the BNP are right or wrong," he told jurors on Thursday.
"It's not about whether assertions made about Islam are right or wrong. Those are issues to be debated in different arenas."
He added: "We live in a democratic society which jealously protects the rights of its citizens to freedom of expression, to free speech.
"That does not mean it is limited to speaking only the acceptable, popular or politically correct things. It extends to the unpopular, to those which many people may find unacceptable, unpalatable and sensitive."
Stirring up racial hatred was not the same as creating racial hatred, but related to inflaming or exciting it, he added.
"This case is about allegations of the commitment of a crime."
Throughout the trial Mr Griffin maintained his comments were attacking religion and not race, and were designed motivate political activity.
And in the wake of the not-guilty verdict, the chancellor - and clear favourite to succeed Tony Blair as prime minister - commented: "I think any preaching of religious or racial hatred will offend mainstream opinion in this country and I think we've got to do whatever we can to root it out from whatever quarter it comes.
"And if that means we've got to look at the laws again I think we will have to do so," he told BBC reporters.
Mr Griffin said the verdict was an indication of a gap between the government and "ordinary, decent" Britons.
"A jury of ordinary decent Yorkshire people took less than three hours to find us not guilty," he said.
"It shows the gulf between ordinary people and the fantasy world of their masters in Whitehall."
The news that the pair were acquitted was greeted with jubilation by a crowd of BNP supporters gathered outside the court.
In a rallying cry, Mr Griffin shouted over a megaphone: "What has just happened shows Tony Blair and the government and the BBC that they can take our taxes, but they cannot take our hearts, they cannot take our tongues, and they cannot take our freedom."
Mr Collett, BNP head of publicity, added: "The BBC have abused their position.
"They are a politically correct, politically biased organisation which has wasted licence fee payers money to bring two people in a legal, democratic, peaceful party to court over speaking nothing more than the truth."
The BBC said it was its duty to highlight matters of public interest.
"In this case the matters raised in The Secret Agent were seen by a large section of the public and caused widespread concern.
"The BBC has an important role in doing this.
"However, the question of whether criminal offences have been committed is of course a matter for the police, prosecuting authorities and the courts and not for the BBC."