A Thai court has dismissed money-laundering and fraud charges against alleged Russian arms dealer Viktor Bout, removing a major obstacle to his extradition to the United States.

An appeals court in August ordered Bout be handed over to Washington on terrorism charges, angering Russia, but the process has been held up by technicalities over the new accusations.

Thailand's criminal court has now dismissed proceedings surrounding the new charges, citing insufficient evidence.

Prosecutors say they will not appeal.

But the long-running extradition battle may not be over yet because Bout's defence lawyer says he is planning a last-ditch legal challenge against the extradition order issued in August.

Bout, a 43-year-old former Soviet air force pilot, was arrested in 2008 after a sting operation in Bangkok involving undercover US agents posing as rebels from Colombia's Marxist FARC group.

Wearing a bullet-proof vest and shackles, he was escorted to court from a high-security Bangkok prison by a team of police commandos for a second straight day of hearings.

His wife, Alla Bout, told reporters the US was trying to use her husband "as a scapegoat to undermine Russian influence".

"The US wants to stage a big show trial and hang on him everything that they don't know who committed anywhere in the world," she said.

He faces a maximum sentence of life in prison if convicted in the US on charges including conspiracy to kill US nationals and providing materiel support or resources to a foreign terrorist organisation.

Bout has argued he could not expect to receive a fair trial in the US.

Russia has previously said the extradition attempt was politically motivated, vowing "to do everything necessary" to bring Bout home.

- AFP