Priya Varrier is seen winking during a song in the video, which has gone viral in India this year.
The accusers said winking and giggling in a “sacred song” that refers to the Prophet Mohammed’s wife was “an act of blasphemy”.
The actress said that the complainants had “misunderstood” the song.
She petitioned the top court after police had registered a case filed by the group which demanded that the song be dropped from the film.
Chief Justice Dipak Mishra dismissed the case against Ms Varrier as well as the director and producer of the movie, saying: “Somebody in a film sings a song and you have no other job but to file a case.”
The complainants said “the 30-second clip shows a schoolgirl and schoolboy exchanging smiles, eyebrows wiggle and winks”, amounting to an “act of blasphemy” in such a song.
When the song was released in February, it went viral and Ms Varrier was one of the most searched for Indian people on the internet.
The scene of her winking inspired a trove of memes on social media and users dubbed her the “national crush” of India.
The movie, Oru Adaar Love, is a Malayalam language film about teenage love and Ms Varrier plays the role of a student.
The film will be released in September as the case delayed its original release date.