Nikki Sinclaire, who represented the West Midlands region in Brussels and Strasbourg until 2014, had denied deliberately submitting 10 dishonest claims for road travel she never made when she had flown more cheaply.
The 47-year-old and her lawyers maintained that instead the expenses had been "deliberately corrupted" by her former office aide, John Ison.
Mr Ison had admitted in court sending a message to another party about the 47-year-old, which read: "Ok, Plan B - fraud."
The jury at Birmingham Crown Court heard there had been at atmosphere of "hostility" between Ms Sinclaire and Ukip leader Nigel Farage, and that Mr Ison had passed information about her to the senior party figure.
Sinclaire of Shirley, Solihull, had denied misconduct in a public office between October 1 2009 and July 31 2010 while a serving member of the European Parliament by making or causing to be made false or dishonest claims for travel expenses.
She further denied a charge that between October 14 2009 and December 31 2010 she fraudulently transferred criminal property into her bank account.
Jurors spent just three-and-a-half hours in deliberations before clearing Sinclaire of both charges.
Sitting in the dock wearing a white jacket and blue top, Sinclaire looked relieved as the verdicts were read out and hugged tearful supporters in the public gallery.
Sinclaire had always admitted the claims on which the Crown's case rested were in "error", but told jurors she "paid no attention" to travel expenses as it was her office staff's job.
She told the jury: "I was negligent - I am embarrassed about it" - however, she denied any deliberate wrong-doing.
Sinclaire said the expenses were either mistakes by staff, or in at least one claim were "deliberately corrupted" by her former aide Mr Ison.
In his evidence, Mr Ison admitted before the jury acting as a spy in her camp for senior Ukip figures.
The ex-MEP's lawyers instructed a forensic accountant who found she would have made just over £3,000 from the claims, while the Crown only placed the figure in "the thousands of pounds".
But Sinclaire, speaking during her trial, said: "I'd just achieved a lifetime ambition to become an MEP and what, I'd throw it away for £3,000, when there was ample budget in the (parliamentary) allowances which I could just take?"
Jurors also heard of several examples where she could have made genuine claims, including parliamentary trips to Cyprus and Cuba, and staff costs, which were never submitted, and effectively left her out of pocket.
Sinclaire alleged that compiling expenses claims was dealt with by her Birmingham office staff, while she just copied information supplied by her assistants onto the forms, before signing them off.
The jury had also heard about a background of Ukip infighting and how Sinclaire lost the party whip as a result of internal disagreements in January 2010.
Jurors heard evidence from key prosecution witness Mr Ison.
Under cross examination from Sinclaire's barrister Sean Hammond, Mr Ison accepted being a "spy or a mole" in her office, and admitted passing information about the MEP to Nigel Farage in 2009-10.
Mr Ison also accepted making 30-40 hours of covert recordings of Sinclaire, and sending a message to another Ukip colleague claiming he had hacked her laptop.
He said he had only acted "for the good of the party" and when asked in court, denied any wrongdoing.
Sinclaire told the EU anti-fraud unit she suspected Mr Ison had filed bogus claims in her name, but no investigation was launched.
She contacted British police in September 2010, but was herself arrested in February 2012.
Unknown to her at the time, Mr Ison had reported her to the police in May 2010.
She said that her subsequent arrest by West Midlands Police, blocked her from re-joining Ukip. She then failed to get re-elected in 2014.