A report in Motherboard said the prosecutor, who was investigating the break-in at Hacking Team, had on Monday asked for the case to be dismissed.
The website said it had obtained a copy of a notice sent by prosecutor Alessandro Gobbis to the people under investigation, saying that he had requested the judge to shut down the probe.
The breach at Hacking Team, a company that sells surveillance and hacking software to governments worldwide, occurred in July 2015.
The investigation has operated under a veil of secrecy but the occasional report has hinted that the prosecution was targeting four former Hacking Team employees.
The names of the four — Alberto Pelliccione, Guido Landi, Mostapha Maanna, and Alex Velasco — were mentioned in the notice.
The report said that another name in the notice was that of Jon Fariborz Davachi, a US citizen of Iranian origin, who was allegedly the person who funded the operation to attack Hacking Team.
This detail was mentioned in the Italian newspaper Corriere Della Sera, which also said that the Italian authorities had obtained an arrest warrant for Sera but been blocked from executing it by the US State Department.
Hacking Team now has 20 days to appeal the prosecutor's decision and seek to extend the investigation.