He also was acquitted of two counts of intentional discharge of firearm that endangers safety.
Castile's death garnered widespread attention -- and sparked nationwide protests over the use of force by police -- after his girlfriend broadcast the shooting's aftermath on Facebook Live.
Several members of the Castile family screamed profanities and cried after the verdict was announced, despite warnings from the judge that everyone in the courtroom should remain composed.
"Let me go!" yelled Castile's mother, Valerie.
The families of Castile and Yanez were escorted out of separate courtroom exits. At least 13 officers were present in the small courtroom.
Outside court, Valerie Castile said she was disappointed in the state of Minnesota, "Because nowhere in the world do you die from being honest and telling the truth.
"The system continues to fail black people," she said. "My son loved this city and this city killed my son and the murderer gets away! Are you kidding me right now?
"We're not evolving as a civilization, we're devolving. We're going back down to 1969. What is it going to take?"
'I didn't want to shoot'
The jury was composed of eight men and four women, including one black man and one black woman.
Jurors deliberated 27 hours and heard two weeks of testimony about the July 6 traffic stop, in which Yanez pulled over a car driven by Castile, 32, with his girlfriend, Diamond Reynolds, and her 4-year-old daughter as passengers.
An audio recording captured Castile telling Yanez he had a gun in the car, and the officer telling Castile not to reach for it. Seconds later, Yanez opened fire.
Prosecutors portrayed Yanez as a nervous officer who lost control of his traffic stop. He was too quick to pull the trigger after learning Castile had a gun, based on an unreasonable suspicion that he was a robbery suspect, they said.
Yanez, a St. Anthony officer, testified he feared for his life because Castile put his hand on his firearm, not his wallet or identification papers, and was pulling the gun from his pocket.
"I didn't want to shoot Mr. Castile," Yanez testified. "
That wasn't my intention. I thought I was going to die."
Yanez's lawyers alleged Castile had been smoking marijuana the day of the shooting, which they said affected his judgment.
Castile was bleeding heavily in the Facebook video but managed to say he wasn't reaching for his gun, which he had a permit to carry. His girlfriend said Castile was reaching for his ID in his back pocket when he was shot.
Castile's fully loaded gun was found in his shorts pocket, Ramsey County prosecutors said.
Reynolds issued a statement Friday, saying Castile was pulled over because he had "a wide nose," like a robbery suspect who was being sought.
"He did nothing but comply with Officer Yanez's instructions to get his driver's license. He was seat belted and doing as he was told, when he was shot by Officer Yanez who fired seven shots into the vehicle where my .... daughter and I also sat. It is a sad state of affairs when this type of criminal conduct is condoned simply because Yanez is a policeman. God help America."
CNN has not obtained a statement from Yanez or his lawyers.
Yanez to leave force
Castile was killed one day after the July 5 fatal police shooting of Alton Sterling
in Baton Rouge, Louisiana, which was partly captured on bystander video.
Those shootings sparked protests nationwide and renewed the debate over the relationship between law enforcement and the communities they serve.
If he'd been convicted, Yanez could have been sentenced to 10 years in prison and fined $20,000 on the manslaughter charge and five years and fined $5,000 on each of the other charges.
The St. Anthony Police Department said Friday that Yanez will no longer be with the police force.
"The City of St. Anthony has concluded that the public will be best served if Officer Yanez is no longer a police officer in our city," according to the city's statement. "The city intends to offer Officer Yanez a voluntary separation agreement to help him transition to another career other than being a St. Anthony officer."
The city said the terms of the separation will be negotiated.
NAACP criticizes verdict
Ramsey County Attorney John Choi said at a news conference that charges were brought against Yanez because Castile complied with the officer's commands and posed no imminent threat.
"Unfortunately, the jury didn't see it that way," he said.
Choi said the divisions between police and the community must be healed.
"As hard as this is for some members of our community, we have to accept this verdict," he said. "It was the product of a fair and impartial investigation, thorough prosecutorial review and a trial by a panel of Ramsey County residents. Their decision must be respected."
On Friday night, a crowd of people gathered on the steps of the state Capitol to hear speakers criticize the verdict. Aerial video showed what appeared to be a few thousand people.
Glenda Hatchett, the Castile family lawyer who has a TV show called "Judge Hatchett," said the family will not give up.
"There should have been, in our opinion, a very, very different outcome," she said after the verdict.