Iraqis on Friday reacted with disbelief, anger and bitter resignation to news that criminal charges in the United States had been dismissed against Blackwater security guards who opened fire on unarmed Iraqi civilians in 2007 in a fusillade that left 17 dead.

The Blackwater guards said they believed that they had come under small-arms fire from insurgents when they began firing machine guns, grenade launchers and a sniper rifle in Nisour Square, a busy Baghdad traffic intersection. But investigators concluded that the guards, who were escorting American diplomats, had indiscriminately fired in an unprovoked and unjustified assault.

The problem with the court case, according to the federal judge who issued the ruling, was that statements given by the guards had been improperly used, compromising their rights.

The shooting, a signal event of the war here, helped calcify anti-American sentiment in Iraq and elsewhere. It also raised Iraqi concerns about the extent of its sovereignty because Blackwater guards had immunity from local prosecution, and stoked a debate about American dependence on private security contractors in the Iraq war.

Many Iraqis also viewed the prosecution of the guards as a test case of American democratic principles, which have not been wholeheartedly embraced, and in particular of the fairness of the American judicial system.

The ruling on Thursday appeared to confirm the feelings of some that their skepticism had been justified.

Abdul Wahab Adul Khader, a 34-year-old bank employee and one of at least 20 people injured in the melee, was incredulous when he heard of the latest ruling.

"What are we - not human?" he asked. "Why do they have the right to kill people? Is our blood so cheap? For America, the land of justice and law, what does it mean to let criminals go?"

The government, meanwhile, expressed its "regrets." On Thursday, Judge Ricardo M. Urbina threw out manslaughter and weapons charges against five Blackwater guards in a ruling that said the case was improperly built, in part, on sworn statements that they had given to the State Department under the promise of immunity.

Prosecutors have not said whether they will appeal the decision.

That logic impressed Gen. Ray Odierno, the American commander in Iraq, who on Friday called the ruling "a lesson in the rule of law" despite his worry that "there were innocent people killed during this attack."

"Of course people are not going to like it because they believe these individuals conducted some violence and should be punished for it," he said. "But the bottom line is, using the rule of law, the evidence obviously was not there, or was collected illegally."

But for Iraqis directly affected by the violence, the result was incomprehensible.

Some victims and their families said they did not understand how charges could have been dropped despite what they regarded as overwhelming evidence.

Several said that in their minds, this should have been an open-and-shut case because they had been shot as they tried to flee - obviously contradicting the guards' reports that they had been attacked.

"I can't even think of words to say," said Sami Hawas, 45, a taxi driver who was shot in the back during the episode and is paralyzed.

"We have been waiting for so long," he added. "I still have bullets in my back. I cannot even sit like an ordinary human being."

Ali Khalaf, a traffic police officer who was on duty in Nisour Square at the time and aided some of the victims, was furious.

"There has been a cover-up since the very start," he said. "What can we say? They killed people. They probably gave a bribe to get released. This is their own American court system."

Some of the victims had been burned so badly, he said, that he and others had to use shovels to scoop their remains out of their vehicles.

"I ask you," he said, "if this had happened to Americans, what would be the result? But these were Iraqis."

Ali al-Dabbagh, a spokesman for Prime Minister Nuri Kamal al-Maliki, said in a statement that the government "regrets" the federal court decision. Despite that muted wording, however, he made it clear where he thought the guilt in the case lay.

"Investigations conducted by specialized Iraqi officials confirmed without a doubt that Blackwater guards committed murder and violated laws by using weapons without the presence of any threat," Mr. Dabbagh said.

In a second statement, he said Iraq was considering suing Blackwater for damages related to the shooting, but did not provide further details.

In addition to the five Blackwater employees who had faced trial, a sixth, Jeremy P. Ridgeway, pleaded guilty to killing one Iraqi and wounding another.

Blackwater, now called Xe, continued to provide security for the United States Embassy in Baghdad until last spring. But in March, the Iraqi government said it would not grant Blackwater an operating license. Afterward, the embassy contract was awarded to a rival security firm.

Also on Friday, the United States military in Iraq said the month of December had been the first month since the United States-led invasion in which an American service member had not been killed in combat. Three United States soldiers died during the month in noncombat-related incidents, the military said.