Washington (CNN) -- A federal judge dismissed manslaughter charges Thursday against five Blackwater security guards in the 2007 deaths of Iraqi civilians in a Baghad square, finding that prosecutors wrongly used the men's own statements against them.

The September 2007 shootout in Baghdad's Nusoor Square left 17 Iraqis dead and two dozen wounded. The killings led Iraq's government to slap limits on security contractors hired by Blackwater, now known as Xe, and other firms.

U.S. District Judge Ricardo Urbina found that the government's case was built largely on "statements compelled under a threat of job loss in a subsequent criminal prosecution," a violation of the Fifth Amendment rights of the five men charged.

"In their zeal to bring charges against the defendant in this case, the prosecutors and investigators aggressively sought out statements the defendants had been compelled to make to government investigators in the immediate aftermath of the shooting and in the subsequent investigation," Urbina wrote in a 90-page decision.

Federal prosecutors "repeatedly disregarded the warnings of experienced, senior prosecutors assigned to the case" in doing so, he found.

Urbina also sharply criticized prosecutors and federal agents who developed the case, calling their explanations for using the guards' statements "all too often contradictory, unbelievable and lacking in credibility."

"In short, the government has utterly failed to prove that it made no impermissible use of the defendants' statements or that such use was harmless beyond a reasonable doubt," he wrote.

There was no immediate response to the decision from the Justice Department, which can appeal Thursday's ruling or seek new indictments against the men.

The men were guarding a State Department convoy moving through western Baghdad when the shooting began. The company said its contractors came under attack, but Iraqi authorities called the gunfire unprovoked and indiscriminate.

Each of the now-former guards -- Paul Slough, Evan Liberty, Dustin Heard, Donald Ball and Nicholas Slatten -- faced 14 counts of manslaughter, 20 counts of attempted manslaughter and one count of using a firearm in the commission of a violent crime.

Prosecutors requested that charges against Slatten be dropped in November, but Thursday's ruling dismisses the counts against all five.

"We're obviously pleased at the decision dismissing the entire indictment and are very happy that these courageous young men can begin the new year without this unfair cloud hanging over them," said Slough's lawyer, Mark Hulkower.

A sixth guard, Jeremy Ridgeway, pleaded guilty in 2008 to voluntary manslaughter and attempted manslaughter.