A three-judge panel at the Putrajaya Court of Appeals near Kuala Lumpur set aside the convictions against Sayed Ibrahim Mydeen Batcha and photographer Ramjali Sayed Ibrahim.
It said that "many aspects of the evidence were not considered by the high court judge", Xinhua reported.
Ibrahim is said to be 46 years old. Batcha's age was not mentioned.
In October 2010, a high court sentenced the duo to death for carrying a bag each containing tins of turmeric powder and 166.9 grams of Ketamine.
They were arrested in February 2009 at the Kuala Lumpur airport.