Phillips was arrested for cocaine and marijuana possession on 27 August 2008, after Los Angeles police caught the former One Day At a Time star with the drugs.
Before that, the actress had been clean for 10 years after turning her back on drugs when she was 32.
Phillips pleaded guilty to one felony count of cocaine possession, and was sentenced to a drug rehabilitation program.
She appeared in court on Friday (30Apr10), demonstrating her commitment to remain sober, and the charge was dismissed.
Phillips called her recovery "the most rewarding time in my life," and she thanked the police for putting her behind bars in the first place, adding, "It really just changed my life."