The Yugoslav war crimes tribunal acquitted the former Bosnian Serb leader Radovan Karadzic of one charge of genocide but upheld 10 other war crime counts related to atrocities in Bosnia's bloody war.

While the decision was a setback for prosecutors and angered survivors in Bosnia, the 10 pending charges against Karadzic include another genocide count covering his alleged involvement in the 1995 Srebrenica massacre of 8,000 Muslim men and boys.

The charge that was dismissed covered the mass killings, expulsions and persecution by Serb forces of Muslims and Croats from Bosnian towns early in the country's 1992-95 war, which left 100,000 dead. Presiding judge Oh-Gon Kwon said prosecutors did not provide enough evidence to "be capable of supporting a conviction of genocide in the [Bosnian] municipalities".

At the halfway stage of Karazdic's long-running trial, judges said there was enough evidence to uphold charges including murder and persecution in the early stages of the war, but the killings did not rise to the level of genocide, which requires prosecutors to prove intent to wipe out a specific group in whole or part.

Prosecutors finished presenting their evidence in May and earlier this month Karadzic had asked judges to dismiss all 11 counts, saying prosecutors had failed to prove their case.

Karadzic's lawyer, Peter Robinson, welcomed the latest decision.

"Dr Karadzic and myself both thought it was a courageous decision of the trial chamber to say at this stage of the case that there was no genocide in the municipalities in Bosnia in 1992. But I do expect that the prosecution will want to appeal [against] this decision."

Prosecutors had no immediate reaction. But survivors of the Bosnian war said the decision could set back any reconciliation.

"We are shocked and disappointed," said Edin Ramulic, who heads an association of victims in Bosnia's Prijedor region. "We have no reason to hope now that the Serbs will go through catharsis and acknowledge that the non-Serbs in Prijedor had been killed, tortured, exterminated, raped."

Professor Lara J Nettelfield, a lecturer in International Relations at the University of Exeter in Britain who has written a book about the tribunal, called the ruling by the court disappointing but not surprising.

"Judges [at the tribunal] have consistently refused to support the prosecution's charge of genocide anywhere but in Srebrenica," Nettelfield said.

The court has repeatedly ruled that the massacre in Srebrenica was genocide, but has never convicted any suspect of genocide for the campaign of killings in the Bosnian towns and villages at the outset of the war.

"The decision also represents a huge disappointment for survivors in those municipalities and anyone who held out hope that the court with the imperfect mechanism of individual criminal accountability would leave behind a body of decisions that corresponded to lived experience there," she added.

Residents of Karadzic's wartime stronghold of Pale, near the Bosnian capital of Sarajevo, were delighted to hear that one charge was removed from the indictment of the man they consider a wartime hero.

"His arrest was stupid to begin with," said Rosa Hadjibesarovic, a Pale resident. "I was surprised when he was arrested. I hope he will be acquitted on all charges."

Karadzic was arrested in 2008, 13 years after he was first indicted on charges of masterminding Serb atrocities. His trial started in 2009 and prosecutors rested their case in May. The trial will continue later this year.

Karadzic's former military chief, General Ratko Mladic, is also on trial on almost identical charges. The first witness in that trial is to begin testifying early next month.