Hallam was jailed in 2005 for the murder of trainee chef Essayas Kassahun but has always protested his innocence
Family and friends, including the actor Ray Winstone, have campaigned to have Sam Hallam's case reopened. Photograph: Graham Turner for the Guardian
Sam Hallam, who has served seven years for murder, is to be released from prison after the prosecution told the court it would not oppose his appeal.
In a dramatic moment at the court of appeal on Wednesday, 24-year-old Hallam was told that he would be released. Jailed in 2005 for the murder of Essayas Kassahun, he has always protested his innocence and his family and friends have campaigned fiercely for his release.
The Metropolitan police face criticism for their murder inquiry and were accused in court of failing to disclose evidence and to pursue lines of inquiry.
Supporters and Hallam's mother, Wendy, wept in court. Outside, scores of friends from north London repeated: "We just can't believe this."Hallam – who was 17 at the time – was convicted in 2005 of murdering trainee chef Kassahun in Hoxton in October 2004. He was sentenced to life with the recommendation he serve 12 years.
Hallam was convicted on the basis of disputed identification by two witnesses who placed him at the scene of the killing. In his defence, Hallam claimed he was playing football with a friend at the time. He said he knew there was going to be trouble on the night of the killing and had wanted to avoid it.
On Wednesday, Henry Blaxhall QC, for Hallam, told the appeal court that new evidence showed Hallam was not at the murder scene and raised serious doubts about the reliability of the only evidence against him from two witnesses.
Blaxhall labelled the case a "serious miscarriage of justice" and said the combination of police failures to investigate and to disclose evidence, and the unreliability of the witness evidence had combined to put him wrongly in jail.
The appeal was brought after the Criminal Cases Review Commission (CCRC) instructed an outside force – Thames Valley – to review the original murder inquiry and pursue new lines of investigation.
Thames Valley police and the CCRC both criticised the original Met police inquiry in documents submitted to the appeal court.
Paul May, who ran the campaign for Hallam's family, said they had uncovered nine witnesses who said Hallam was not at the scene.
The main evidence against Hallam came from a young girl, Phoebe Henville, who changed her account several times. There was no forensic evidence to link Hallam to the scene and he was of previous good character.
David Hatton, QC for the prosecution, stood shortly after 2pm to announce the Crown would not be defending the appeal. "We have given this anxious consideration for a long time and during today and we are not in a position to oppose the appeal," he said.
Court of appeal judges are expected formally to quash the murder conviction at noon on Thursday.
Michael Broster, the police officer who led the original murder inquiry, was criticised by May outside court on Wednesday, and by the CCRC and Thames Valley police for his investigation in documents presented to the court.
Hallam's father committed suicide while his son was in prison. His uncle said: "It's disgusting. A young girl gave three different accounts of what happened; there was no DNA, nothing; and the police have based their case on that girl."
Kassahun, 21, had come to the aid of a friend, Louis Colley, who was being attacked on Old Street, in central London, by a mob of youths over a trivial perceived insult.
One of seven charged with the murder, Hallam initially, on the advice of his lawyer, declined to answer police questions, something his supporters claim may have counted against him at the trial.
Another man, Bullabeck Ringblong, was also convicted of the murder and is serving life. The trial judge recommended Hallam, who is in HMP Bullingdon, should serve a minimum of 12 years.
Among the supporters of Hallam outside court on Wednesday was Patrick Maguire, who was wrongly accused over the 1974 Guildford pub bombings. Hallam's other supporters include the actor Ray Winstone, but the campaign to free him has been driven by friends and members of the community in Hoxton. Penny Millard, a friend, said the community had united to campaign for Hallam.
"They all knew he was innocent. He wasn't there," she said. "Today is amazing. It should have happened sooner but the wheels of justice are slow. We can't believe this."
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