Police stand amongst the rubble after the car-bomb attack in Omagh, northern Ireland, in this file photograph dated August 16, 1998.
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Daly faced murder charges along with causing the explosion and possessing the bomb, and two charges relating to another 1998 bomb plot.
He had appeared in court in Omagh last week to face all the charges related to the atrocity.
The case against the only remaining suspect charged with the Omagh bombing, in which 29 people were killed, has collapsed, prompting families of the victims to claim that their loved ones will never get justice.
“There is a sense of deep disappointment among the families that we have again been let down by the criminal justice system”, said Michael Gallagher, whose son died in the bombing.
Speaking on his way to court in Ballymena, where prosecutors will officially announce that they are dropping all the charges against Daly, Gallagher said: “The chances of a successful criminal prosecution against the Omagh bombers is very, very low after this”.
Mr Daly, from Co Armagh, has always denied involvement in the bombing which inflicted the greatest loss of life of any terror atrocity in the history of the Troubles.
The dead came from both sides of the Irish border, England and Spain. Most of those slain were women and children, including a mother 9 months’ pregnant with twins.
The four men were ordered to pay £1.6 million to victims, although no money has ever been handed over.
In 2007 the only other man charged with the 29 murders, South Armagh electrician Sean Hoey, then 38, was found not guilty after a lengthy non-jury trial.
According to Agence France-Presse, a key witness in the pre-trial hearings had delivered inconsistent and contradictory testimony.
On Tuesday, Northern Ireland’s Public Prosecution Service dropped 29 murder charges against Daly, reportedly on the basis of “insufficient evidence”.
“We need some answers, we need to know what went so drastically wrong 18 years on – conviction after conviction has failed in Omagh and yet there is so much knowledge about Omagh”.
A statement from the Release Seamus Daly group said: “The case against Seamus Daly has been flawed from the beginning”.
The PPS decision came before Daly’s case reached the floor of the Crown Court. But after Mr O’Connor conceded that it was possible he confused receiving a call from Mr Daly on the day of the bombing with a call he had received eight days earlier, the case was no longer tenable.
“It would seem that they have been unable to put together a strong enough case and they will withdraw those charges”.
Mr Gallagher hoped the Taoiseach would support the demand for an inquiry.
The spokeswoman added: “On behalf of the PPS, I extend our sympathy to the families affected by the Omagh bomb”.
“We understand how hard this decision will be for them”.
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Daly’s lawyer, Peter Corrigan, compared the prosecutors’ case to “a house of straw”.
