The New South Wales Supreme Court ruled that the evidence originally used to jail Kathleen Folbigg was "not reliable".
She was was pardoned and freed after spending 20 years in prison.
Ms Folbigg said proof of her innocence had been "ignored and dismissed" for decades.
Speaking outside court on Thursday the 56-year-old said: "The system preferred to blame me rather than accept that sometimes children can and do die suddenly and unexpectedly and heartbreakingly."
The case was over the deaths of her four infant children Caleb, Patrick, Sarah, and Laura - each of whom died suddenly between 1989 and 1999, aged between 19 days and 18 months. Prosecutors at her trial alleged she had smothered them.
The case relied on circumstantial evidence using Ms Folbigg's diaries. Those diaries were never examined by psychologists or psychiatrists but were used by prosecutors to paint her as an unstable mother prone to rage.
In 2003, she was sentenced to 40 years in jail for the murders of Sarah, Patrick and Laura, and the manslaughter of Caleb.
It was later downgraded to 30 years on appeal, but Ms Folbigg lost a number of legal challenges that sought to overturn her convictions.
Earlier this year, a landmark inquiry into her case concluded there was reasonable doubt over her guilt, due to scientific findings that her children could have died of natural causes because of incredibly rare gene mutations.
And it was that "substantial and extensive body" of new evidence which led to Ms Folbigg being cleared of all charges on Thursday, Chief Justice Andrew Bell said.
Ms Folbigg's legal team confirmed they would now seek compensation for her years in jail.
"I am grateful that updated science and genetics has given me answers as to how my children died," Ms Folbigg said.
"However, even in 1999, we had legal answers to prove my innocence.
"[Prosecutors] took my words out of context and turned them against me... I hope that no-one else will ever have to suffer what I suffered."
