"We did not have evidence at this time that was sufficient enough for us to proceed in a prosecutable case," San Francisco district attorney spokesperson Erica Derryck said.
Blay was arrested and charged with robbing Nasser's Market in late August. Police believe as many as five people were involved in the holdup.
Video from a store security camera could not clearly identify the robbers, investigators said, but store owner Tong Van Le was able to pick Blay and a juvenile from a photo lineup. With that evidence, prosecutors were able to file charges against the two.
But on Sept. 13, Le was killed just after he drove his Lexus into the garage of his Novato home.
Investigators believe that someone followed Le home and that he was killed to prevent him from testifying against Blay.
With their only witness dead, prosecutors had no choice but to drop the charges against Blay and the juvenile.
"The way I look at this discovery at this point, it seems like, from what I can read, I don't believe they will be able to go forward, absent that witness," Blay's lawyer Rafael Trujillo said.
Trujillo denied Blay's involvement in Le's murder.
Le's store is now closed, his wife and two children in hiding, fearful for their lives.
Prosecutors can refile charges if they find new evidence.
In Novato, police said they have developed some good leads in Le's murder.
"Some of those leads certainly take us back to San Francisco, and the fact that he was the victim of a robbery, that fact that he did identify those members of a gang in San Francisco that were involved in the robbery," Novato police chief Joseph Kreins said.
Despite the most recent charges being dropped, Blay will not be released anytime soon. He is serving time in Alameda County for violating parole on a prior conviction for evading police earlier in the summer.