The Cook County State's Attorney's Office says the search warrant lacked probable cause.
The yard is behind an apartment building on the 6100-block of West Miami.
In 1998, Chicago police excavated the property after a retired officer tipped them that he had seen Gacy there with a shovel one morning in the 1970s.
Gacy was convicted of murdering 33 young men from 1972 through 1978. He buried most of the bodies in a crawl space under his home.
The Associated Press contributed to this report.