Prosecutors were unable to prove their case beyond a reasonable doubt, and the assault and attempted assault charges were dropped Friday, the Manhattan district attorney's office said.
Alston was arrested Aug. 27, 2007, after a confrontation with Wilbert Ashman of Long Island inside Club Stereo in Manhattan. Ashman told police he and Alston accidentally bumped each other, and during an ensuing argument the 31-year-old player cut him on the neck.
Defense lawyer Alberto Ebanks did not immediately return a call.
The charges were dropped because "while the victim suffered serious knife wounds, there are questions about where the victim was injured," said Barbara Thompson, a spokeswoman for the district attorney.
Ebanks said in August that witnesses had told him Ashman did not appear to be injured when he left the club and did not alert police officers who were in the area.
The 6-foot-2 guard out of Fresno State signed with the Rockets in 2004. He's averaged 12.2 points and 5.7 assists in 54 games this season.