The environment ministry said results of tests on animals on a farm near Dorking in the county of Surrey, south-east England, were negative and a temporary exclusion zone was removed.
The suspected case had raised fears among farmers that the virus may have spread because the farm was outside the quarantine zone imposed after the first case was confirmed in cattle about 10 miles (16 kilometres) away on August 3.
Initial tests had proved inconclusive but Britain's chief vet Debby Reynolds said there was only a "low" level of suspicion that the test would prove positive, while the farmer affected said he was convinced it was not the virus.
"The vet was 99 percent sure it was not foot and mouth," Laurence Matthews told reporters Friday, explaining that he had contacted the authorities as a precaution because he has connections to the original site.
His wife, Paula, told Sky News television Saturday they were "absolutely delighted" at the news after a tense 24 hours.
The announcement, a day after a similar negative result from livestock on a third farm, will come as a relief to Britain's farmers who had feared a repeat of the devastating 2001 epidemic.
The outbreak six years ago cost the country an estimated eight billion pounds (11.8 billion euros, 16.3 billion dollars), saw up to 10 million cattle slaughtered and forced many farmers to the wall.
Reynolds herself also said she was pleased at the negative result, but still urged continued caution as an investigation focused on a nearby animal disease and vaccines research centre which is the suspected source of the outbreak.
"I do have to remind everyone, this is a time for relentless vigilance," she told BBC News 24 television. "Everybody who has livestock will be looking at them very regularly for any signs of foot and mouth disease."
The National Farmers' Union also welcomed the news.
"It's obviously good news. It means that the focus can return to containing and eradicating the disease within the main protection and surveillance zone," spokesman Chris Pryke told AFP.
"Of course, it doesn't mean that all farmers can drop their vigilance by any stretch of the imagination."
After the first case, the government imposed an immediate ban on the movement of cattle, pigs and sheep which are most susceptible to the disease, as well as no-go areas around the affected farms.
Nearly 600 animals on three farms have been slaughtered, some as a precaution due to suspected "dangerous contact" with infected beasts.
Reynolds has said the risk of infection outside Surrey was "very low" and that further cases from the original virus were "unlikely", but she did not rule out secondary infection.
An environment ministry interim report has concluded that Pirbright was "very likely" to have been the source of the infection.
The site is shared by the government-run Institute of Animal Health (IAH) and a private vaccines firm Merial Animal Health Limited, both of which have used a strain of virus similar to that in the infected animals.
Each has denied any biosecurity breach.