Geneva lawyer François Membrez, who represents the two, made the announcement on Tuesday.
Hannibal Gaddafi and his wife Aline were charged by a Swiss magistrate with inflicting physical injuries and using threats and force against two of their staff, while staying at a hotel in Geneva.
The Gaddafis had denied the allegations and were released on SFr500,000 ($476,500) bail.
They left the country but the case escalated into a diplomatic row, with Libya taking retaliatory measures, including arresting two Swiss nationals on alleged immigration violations.
The withdrawal of the complaints was a condition imposed by Libya to end the crisis with Switzerland.
Alain Berger, the lawyer representing the Gaddafis, said: "If it is true, it is excellent news." He was still awaiting official confirmation.