GIRDWOOD -- Julie Pederson said she always believed her longtime neighbor, former U.S. Sen. Ted Stevens, was the victim of a witch hunt and that he was innocent of the corruption charges brought against him by the Justice Department.

"We knew it all along," Pederson said after the federal government Wednesday moved to dismiss the case against Stevens. "Unfortunately, it's a little too late."

Pederson is among Alaskans who believe Stevens' conviction last October was a lethal blow to his bid for re-election after 40 years in office. The election outcome won't change with the determination by Attorney General Eric Holder that it would be in the interest of justice to dismiss the indictment against the Alaska Republican and not proceed with a new trial.

"If they had done that before, he'd still be senator," Bob Sloan, a nondenominational church pastor, said at an Anchorage coffee shop.

Not all Alaskans agreed with the Justice Department's decision.

"It's disgusting," said Jim Murphy, a longtime Stevens supporter until he was charged.

"Clearly a jury thought he was guilty. He was judged by his peers, but somehow wielded his influence and power," Murphy said. "I just think the average guy would be sitting in jail right now."

The 85-year-old Stevens was indicted last summer on charges he lied on Senate disclosure forms to conceal gifts and renovations at his Girdwood home from Bill Allen, the former head of VECO Corp., a now-defunct oil field services company.

Stevens, the longest-serving Republican in the Senate, asked for a speedy trial, and was convicted a week before the November election. He returned to Alaska to campaign, but the fiery senator looked haggard, lacked his signature bluster and lost the election to Democrat Mark Begich in a close race.

The Justice Department court filing follows a case tainted by problems -- including misbehavior by prosecutors -- both during Stevens' trial and after he was found guilty by a jury.

"I always knew that there would be a day when the cloud that surrounded me would be removed. That day has finally come," Stevens said in a statement. "It is unfortunate that an election was affected by proceedings now recognized as unfair."

No one answered the door at Stevens' Girdwoood home but residents in this ski resort town 40 miles south of Anchorage rushed to his support Wednesday.

"I think it's awesome," said Chris Roberts, a 20-year resident who is a snowmobile tour operator and gift shop owner. "How could you not like a guy with the nickname of 'Uncle Ted.' "

"I think they should get rid of Begich and get Stevens back in. The only reason Begich won was because of the unjust words said against Ted," said Judy Basler, a 33-year resident of Girdwood. "You wouldn't do that to your grandpa. He's like the grandpa of our state."

Mike Tibbles, Stevens' campaign manager last year, said he feels a sense of relief but also outrage.

"Just watching this, and the misconduct that has gone on, to me seems unbelievable, but this is a step in the right direction," he said. "I just feel sad for Sen. Stevens that this has been able to happen to him and have such a negative impact on his life."

"Sen. Stevens deserves to be very happy today. What a horrible thing he has endured. The blatant attempts by adversaries to destroy one's reputation, career and finances are an abuse of our well-guarded process and violate our God-given rights afforded in the Constitution," Alaska Gov. Sarah Palin said in a statement.

Palin, like many in both political parties, had called on Stevens to step down after the jury conviction.

The news hit as Alaskans woke up Wednesday morning, creating a buzz at coffee shops and restaurants across the state.

Tim Nelson was among those getting coffee in Anchorage.

"Whether you agree with his politics or not, he was a politician who gave his whole heart to what he was doing," said Nelson, a carpenter who said he voted for Stevens last November.

Nelson said perhaps there was some culpability on Stevens' part, but he believes it was most likely a case of the senator being negligent in his disclosure forms.

Like many Alaskans, he said the charges didn't seem to be "a very big issue."

The Alaska Republican Party had backed Stevens all along, and party chairman Randy Ruedrich hailed the news.

"I am delighted to see justice moving forward. The position that the Alaska Republican Party took after the trial was that Alaskans needed to support the senator, and now we have further information to support our position," Ruedrich said.

Lisa Sutherland worked for Stevens for about 30 years in various duties, including chief of staff.

"I saw Ted Stevens give his heart and soul to serve Alaska and our nation day in and day out for most of my adult life. I am beyond joyful that what I knew all along -- that he was innocent -- has finally been confirmed by the Department of Justice," she said. "It took a lot of political guts for Attorney General Holder to do what he did to make sure justice was served."