Lohan, 25, who has made multiple trips to court, jail and rehab since a 2007 drink-driving and cocaine possession arrest, was praised for completing months of community service at a Los Angeles morgue and court-ordered psychotherapy.
"She has done everything that this court has asked of her," Los Angeles Superior Court Judge Stephanie Sautner said.
"Probation terminates today. Now."
Lohan let out a sigh of relief and hugged her attorney.
Although the Mean Girls actress will remain on informal probation until 2014 for a 2011 jewellery theft, she will not have to report regularly to court and will no longer be compelled to live in Los Angeles - as long as she stays out of trouble.
But Judge Sautner did send Lohan on her way with words of warning.
"I know it is kind of hard when people are following you all over the place, but that is the life you chose. You need to live your life in a more mature way. Stop the nightclubbing and focus on your work."
"I don't expect to see you again," Judge Sautner added. "Goodbye and good luck."
Lohan's once promising movie career was derailed by the 2007 arrest, years of hard partying, missed court dates and failed drug tests that saw her probation extended repeatedly.
But the former child star is now on the comeback trail.
She posed for Playboy, hosted TV sketch show Saturday Night Live, has an upcoming guest part in TV musical Glee and a made-for-TV movie role as screen legend Elizabeth Taylor.
In court, Lohan thanked Judge Sautner for helping her turn her life around.
"I just want to say thank you, your honour, for being fair. It has really opened a lot of doors for me."
Lohan left the Los Angeles courthouse without speaking to hordes of reporters and TV crews.
