Charles Ray Finch, 81, was freed in May after his case was dismissed. (Representational)

US prosecutors have dropped their case against a North Carolina man 43 years after he was sentenced to death for a murder he says he did not commit.

Charles Ray Finch, 81, was freed in May after his case was dismissed on the grounds that police mishandled the investigation of the 1976 shooting of a storekeeper during an attempted robbery.

Prosecutors have since decided a new trial would be impossible since so many of the witnesses are either dead or have moved away, the Washington-based Death Penalty Information Center (DPIC) said Wednesday.

The African-American defendant had been sentenced to death in North Carolina in July 1976 for the grocery store clerk's murder, but the sentence was later commuted to life in prison.

In 2002, a group of law students went back to study the case and found a number of problems that threw doubts on the conviction, including police manipulation of witnesses during a line-up and lying about a ballistics report.

In the line-up, a witness had told the police that the suspect had been wearing a coat at the time of the killing. Finch was the only one in the room made to wear a coat.

In January an appeals court ruled that if the jury had been aware of such manipulations it would not have convicted Finch, and overturned the verdict.

Finch was released from jail in a wheelchair in May and reunited with his family.

DPIC said Finch was the 166th person to be exonerated after being wrongfully convicted and sentenced to death since 1973, and the 18th to have spent more than 25 years behind bars.

"Mr Finch's exoneration illustrates the continuing failure of the judicial system to protect the innocent in death-penalty cases, and particularly prisoners of color," said DPIC director Robert Dunham.