But British police said that Assange still faces arrest on charges of jumping bail if he walks out of diplomatic protection, which Assange claims is still needed to keep him from being extradited to the United States on charges of disclosing confidential military and diplomatic documents.

The Swedish Prosecution Authority said in a statement that Sweden's director of public prosecution, Marianne Ny, "today decided to discontinue the investigation" into a rape claim against Assange.

The silver-haired activist made a rare appearance on the balcony of the embassy late on Friday afternoon with a clenched fist in the air.

"Today is an important victory," he told the throng of journalists and supporters camped outside the embassy.

He said that a "legal conflict" with the United States and the United Kingdom was continuing and that a "proper war was just commencing."

"Seven years without charge while my children grew up without me. That is not something I can forgive. It is not something that I can forget," he said.???

He anticipated there would be an official inquiry into the "terrible injustice" that had occurred, and hoped it would be a more broad inquiry into the ability of states, especially in the European Union, to detain and extradite people without charge.

He said his legal team hoped to engage with UK and US authorities to find "a way forward".

Assange, 45, who has been in Ecuador's London embassy since 2012, where he was granted political asylum, tweeted a smiling image of himself soon after the news broke.

He later tweeted that he does not forgive or forget.

Melinda Taylor, a member of Assange's legal team, told Fairfax their next step was to push for the US to "clarify" Assange's legal status.

"Their prosecution has been going on since at least 2010, that's a hell of a long time," she said. "He has been deprived of the ability to defend himself."

His lawyers would approach the Department of Justice in the US and request that they either confirm their decision to seek Assange's extradition, or drop the case altogether, she said.

Asked if Assange would consider agreeing to extradition to fight the case conventionally in the US courts, Ms Taylor said Assange had already indicated earlier this year that he would do so "if he could rely on standard due process protections and assert a public interest defence".

"In any fair trial he would be sure to be acquitted," she said. "But none of that can start, though, until the US makes its intentions clear."

Assange argues that he and Wikileaks are protected under freedom of speech laws, so he has no case to answer in the US.

Assange's lawyers will also call on the UK to drop the outstanding arrest warrant against him.

They have a potential legal avenue: to approach the courts arguing that the Swedish decision constitutes a significant change in circumstances that means the warrant should be reviewed.

Given that the maximum sentence for breach of bail is one year's prison, and the UN has determined that he has been in effect detained for seven years, "such credit would exceed any sentence and makes his arrest moot", MsTaylor said.

It was also time for the Australian government to "step up to the plate" and show that it would act to defend the rights of journalists, Ms Taylor said.

Assange's Australian passport expired last year, so he is currently unable to travel to either Ecuador or Australia even if he were to walk out of the embassy a free man," Ms Taylor said.

"At least they could give him an Australia passport," she said.

pic.twitter.com/dDvB1Vekhg

Assange's Australian legal adviser Greg Barns said he would ask Malcolm Turnbull to intervene.

"Mr Turnbull should talk to [Theresa] May about safe passage out [of the UK]", Mr Barns told Fairfax Media.

"Mr Turnbull should also ask whether there is an extradition request against Assange."

Swedish prosecutors interviewed Mr Assange at the embassy last November and received a full translation of the interview in mid-March, which they have since been reviewing.

In May, Mr Assange's lawyers asked the Stockholm District Court to review the detention order and arrest warrant against him.

They argued that the US had expressed they were seeking his extradition to the US over alleged crimes relating to Wikileaks' publication of classified documents.

US attorney general Jeff Sessions in April said arresting Mr Assange was "a priority".

Mr Assange's lawyer Per Samuelson said Mr Assange faced a "real risk" of extradition from Sweden. He argued his client's remand status should be changed so he could leave the embassy to travel to Ecuador.

The accusation against Mr Assange relates to an encounter between him and a woman he met at a WIkileaks conference in Stockholm in August 2010.

However Mr Assange has maintained he is "entirely innocent".

Earlier this month, Ecuador sent a letter to the Swedish government condemning the "obvious lack of progress" in the investigation of the allegation against Mr Assange, saying it was "extremely worrying" and demanding that Sweden either charge Mr Assange or drop the investigation.

In February last year the UN Working Group on Arbitrary Detention said Mr Assange was in effect being arbitrarily detained against international law.

However Mr Assange is not likely to celebrate by immediately leaving the Ecuadorian embassy in London as he would still be arrested.

In a tweet, Wikileaks said the "focus now moves to the UK". US attorney general Jeff Sessions has said arresting Assange was "a priority", over alleged crimes relating to WikiLeaks' publication of classified documents.

The Home Office was unable to comment on the implications of the decision because of the upcoming election.

Fairfax understands that the standard procedure, which will apply in this case, is for the department to neither confirm nor deny the existence of an extradition request for Mr Assange before an arrest has been made.

The Metropolitan Police Service, who have been staking out the embassy for five years, said there was still an outstanding warrant for Mr Assange's arrest in the UK for skipping bail. Wikileaks claimed the UK would arrest Mr Assange "regardless".

"Westminster Magistrates' Court issued a warrant for the arrest of Julian Assange following him failing to surrender to the court on the 29 June 2012. The Metropolitan Police Service is obliged to execute that warrant should he leave the Embassy," the Metropolitan Police said in a statement.

"Whilst Mr Assange was wanted on a European Arrest Warrant (EAW) for an extremely serious offence, the MPS response reflected the serious nature of that crime.

"Now that the situation has changed and the Swedish authorities have discontinued their investigation into that matter, Mr Assange remains wanted for a much less serious offence. The MPS will provide a level of resourcing which is proportionate to that offence."

With Washington Post