"This has near ruined my life", Steven Elder, 43, said after a brief court appearance.
"Everyone who lives near me won't even speak to me now", said Elder, who works as a clerk at the Department of National Defence.
Crown prosecutor Celynne Dorval said the year-old charge was dropped because key American witnesses were unavailable.
But defence lawyer Ron Guertin called it "a classic case of entrapment".
Guertin said Elder's problems began last year when he was reading an American magazine and saw an advertisement offering erotic films.
Unaware the ad was placed by the American Postal Service as part of a police sting operation, Elder wrote for more details. He was then told the advertiser had even "juicier" films that might be illegal in Canada, Guertin said.
"He wrote back right away and said he didn't want anything illegal", Guertin said.
But last August, two films were delivered to Elder's home in Gloucester by undercover cops. he was arrested about 15 minutes later.
Police seized boxes of Elder's property, including his computer and his kids' video games.
The embarrassing charge also immediately stalled Elder's hopes for advancement within the Department of National Defence and made him a pariah with many people around him.
"If it wasn't for my lawyer I don't know how I would have survived this", Elder said.