Kercher family lawyer Francesco Maresca said it was "an important day for the Italian legal system".
The case began in 2007, when Knox, then 20, was studying abroad and lived with Kercher.
Kercher's parents have repeatedly said they simply want the truth surrounding their daughter's death.
Neither he nor Knox had solid alibis for the night of Kercher's murder, Sollecito writes.
That November, Kercher's semi-naked body was found at the home, with her throat slashed.
The only people who expressed relief at Tuesday's verdict and news of the retrial were Kercher's family.
CNN: Analysis: Amanda Knox case is complicated, confusing mess
There was no physical trace of them in the room where Kercher died, Knox and Sollecito's lawyers insisted.
The Kercher family are due to hold a press conference at a hotel in Perugia at 1000 GMT.
He had admitted he was in Miss Kercher's home the night she was murdered but denied any wrongdoing.
Key dates in the case of American student Amanda Knox, convicted in the slaying of British roommate Meredith Kercher.
Miss Kercher's family lawyer, Francesco Maresca, said they were satisfied with the verdict.
"She will never come back here, whether she should legally or not, " the Kercher family lawyer Francesco Maresca told CNN.
The pair spent four years in jail for Miss Kercher's murder, but have always denied any involvement in the murder.
Knox and Sollecito were initially found guilty in connection with Kercher's murder, but were ultimately acquitted two years later on appeal.
CNN: Analysis: Amanda Knox case is complicated, confusing mess
That means that either Knox and Sollecito were the victims of a miscarriage of justice then, or that Kercher is now.
And they testified that a bra clasp belonging to Kercher and found in her room had Sollecito's genetic material on it.
Knox is herself currently appealing her conviction for defaming Patrick Lumumba, a club owner whom she falsely accused of killing Kercher.
Miss Knox and Mr Sollecito were originally sentenced to 26 and 25 years in prison for murdering and sexually assaulting Meredith Kercher.
"We respect the court but we had hoped for a different outcome, " Kercher's mother told me the day Knox was set free.
CNN: Analysis: Amanda Knox case is complicated, confusing mess
Kercher family lawyer Francesco Maresca welcomed the decision to overturn the appeal.
Miss Kercher's older sister, Stephanie, welcomed the decision as a step forward.
She described attending a chocolate festival and a book fair with Kercher.
Sollecito wrote that he believed that Guede acted alone in killing Kercher.
The lawyer for the Kercher family, Francesco Maresca, was in court Monday.
Another man, Ivorian drifter Rudy Guede, was convicted separately of Kercher's killing.
Knox, then 20, shared a room with British student Meredith Kercher, 21.
Knox and her erstwhile lover Raffaele Sollecito were famously convicted of Kercher's murder and sentenced to 26 and 25 years respectively in 2009.
For those who want more attention on Kercher, a roundup of tweets can be found searching the site's grid for her last name.
Part of the original prosecution case was based on DNA evidence found on a knife and on a bra clasp belonging to Kercher.
In the meantime, Italians assume Knox will never set foot in Italy again, whether she is ultimately found responsible of Kercher's murder or not.
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