1:05 PM PT -- First Assistant to the Cook County State Attorney Joseph Magats -- who replaced Kim Foxx when she recused herself -- says they dropped the charges because Smollett doesn't have a violent criminal history, and lying about the alleged attack was not a violent crime.

Magats says his office prioritizes violent crimes in Chicago, and felt this case wouldn't be the best use of resources. For the record, he says he made this decision alone ... without consultation from Foxx.

He also squarely says he believes Jussie DID concoct a hoax and lied about it to police. Even though Chicago PD and Mayor Emanuel ripped the State's Attorney's Office ... Magats made it clear he stands by the findings of the cops, and believes they had the evidence to get a conviction.

The obvious question is asked ... why take the case to a grand jury, only to drop the charges? Check out Magats' answer -- a lot of people, and not just Chicago PD, won't buy what he's selling here.

BTW, Magats says discussions have been going on for weeks with Jussie's camp ... about dropping the charges, and his community service. All of which must have been done in total secrecy because we know cops, the Mayor and others involved in the case had no clue this was going to happen.

10:45 AM PT -- Mayor Rahm Emanuel is very strongly hinting at corruption in the State's Attorney's Office, calling the decision to drop the charges against Smollett a "whitewash of justice."

The Mayor added, "From top to bottom, this is not on the level." He called for accountability from the prosecutors.

Emanuel was joined by Chicago PD Superintendent Eddie Johnson who said he didn't feel justice was served by letting Smollett off the hook.

What's more, Johnson said if Jussie was, in fact, innocent ... he should've taken his day in court, and not broker a backdoor deal in secrecy. Bigger picture -- Johnson feels the City of Chicago is still owed an apology, as he believes Jussie carried out a hoax.

10:15 AM PT -- FOX says, "Jussie Smollett has always maintained his innocence and we are gratified that all charges against him have been dismissed."

As for WHY they were dropped -- you'll recall State's Attorney Kim Foxx recused herself from the case. She reportedly had asked cops to stand down at the behest of Tina Tchen -- Michelle Obama's former Chief of Staff and a friend of Jussie's family. The conflict forced Foxx to bow out.

The Cook County State's Attorney's Office tells us the decision to drop all charges against Jussie was made by Joseph Magats -- the First Assistant State's Attorney -- who was placed in charge of the case after Foxx's recusal, and NOT by Foxx.

It's still odd. Sources tell TMZ the prosecutor in the case, as late as Friday afternoon, was making plans to handle issues involving cameras in the courtroom for the trial ... and seemed completely unaware of plans to drop the case.

9:22 AM PT -- Jussie and his lawyer, Patricia Holmes, just addressed the media, and the takeaway message was simple ... he's happy and wants to get on with his life. Holmes reiterated this was not a deal Jussie struck with prosecutors -- instead, they dropped the charges on their own, and he forfeited his bond voluntarily ... it wasn't a tit-for-tat situation.

Jussie thanked everyone who supported him through this case, and maintained he'd been truthful and consistent throughout the case. He added ... that he would never put the LGBTQ movement "through a fire like this." He also thanked his "Empire" cast members for their support.

If you're wondering if things will really get back to normal for Jussie -- he stopped to take a few selfies with fans on his way out of court.

And there's this ... federal law enforcement sources tell us Jussie is still under investigation for the threatening letter -- with racist and homophobic slurs -- that was sent to him at the "Empire" studio 8 days before the alleged attack.

You'll recall ... the Chicago PD Superintendent claimed Jussie sent it to himself, but our sources say the FBI had not reached that conclusion yet.

8:45 AM PT -- Jussie's family has also released a statement celebrating the news. They state, "This morning truth has prevailed and (Jussie) has been vindicated."

They continue, "While many were quick to rush to judgement before hearing the actual truth, we are grateful that the truth about Jussie has come to light. We look forward to bringing the real perpetrators to justice."

8:35 AM PT -- State's Attorney Kim Foxx's office says, "After reviewing all of the facts and circumstances of the case, including Mr. Smollett's volunteer service in the community and agreement to forfeit his bond to the City of Chicago, we believe this outcome is a just disposition and appropriate resolution to this case."

The statement is consistent with what our sources said about Jussie only getting community service if he'd been convicted. The decision is NOT sitting well with Chicago PD.

On the other hand, Jussie's co-workers on "Empire" are celebrating on Twitter.

Jussie Smollett will not be prosecuted for allegedly faking a racial attack, because all charges have been dropped!!!

Jussie and his lawyers ran to court Tuesday morning in Chicago, where he was facing 16 felony counts of lying to police in the alleged racial and homophobic attack.

Jussie will surrender his $10,000 bond. But, that's it. The case is over.

We're told the State's Attorney, Kim Foxx, told Chicago police she was dropping the case because Jussie would have only gotten community service if convicted and she said he has already performed community service so there is no point in prosecuting him. We could not find any record of Smollett doing community service.

We're told Chicago police are "furious" and feel something untoward is going on with Kim Foxx.

Jussie's lawyers say, "Today, all criminal charges against Jussie Smollett were dropped and his record has been wiped clean of the filing of this tragic complaint against him. Jussie was attacked by two people he was unable to identify on January 29th. He was a victim who was vilified and made to appear as a perpetrator as a result of false and inappropriate remarks made to the public, causing an inappropriate rush to judgment."

The lawyers go on ... "Jussie and many others were hurt by these unfair and unwarranted actions. This entire situation is a reminder that there should never be an attempt to prove a case in the court of public opinion. That is wrong. It is a reminder that a victim, in this case Jussie, deserves dignity and respect. Dismissal of charges against the victim in this case was the only just result."

A source close to Jussie says the prosecution's case "disintegrated." As we reported, there were issues with the $3,500 check the 2 brothers, Ola and Abel Osundairo, received from Jussie. The Police Superintendent had said the money was payment for the fake attack, but it appears it was actually for physical training.

The Police Superintendent also said during a news conference that Jussie wrote that threatening letter 6 days before the attack when in actuality the FBI had not concluded who wrote the letter.