McMahon was found dead by his partner on November 14, 2007.
Zambra had been in custody since April of last year.
Zambra is one of the capital's most feared criminals and has been arrested numerous times by gardai investigating a spate of gangland crimes in the capital over the past six years.
A source explained: "Zambra is a very serious criminal with connections to a lot of very serious people.
"Gardai across the city but especially in Ballyfermot will be on alert because this man is back on the streets -- things are expected to get busier, a lot busier."
Zambra's associates have been arrested for a number of murders including that of gang thug John Berney in March, 2008 and a double murder in Crumlin in October, 2007.
When the bitter Crumlin/Drimnagh feud was at its height, Zambra was arrested in the company of a notorious Coolock gang boss on O'Connell Bridge in March, 2008.
Armed members of the Emergency Response Unit swooped on the criminals' car after officers received information that a major crime was going to happen.
No firearms were found in the car that he was travelling in and Zambra was released without charge.
Zambra has a number of previous convictions including a 10-year stretch handed down in July 1997 for an incident in which he stabbed three prison officers with a syringe filled with his hepatitis C-infected blood while trying to escape from the Mater Hospital.
Zambra admitted a number of robberies in March, July and August 1996. He carried a spear made with a serrated knife tied to a wooden pole in one raid and used a sawn-off shotgun to rob a bank during another.
Zambra's murder trial opened on Tuesday of last week before Mr Justice Patrick McCarthy and a jury of seven women and five men.
However, the jury was sent away while all sides dealt with a legal issue.
The 12 jurors returned to court yesterday afternoon, when Denis Vaughan Buckley, prosecuting, said he was not offering any further evidence.
The judge then acceded to a defence request to direct the jury to acquit Zambra.
"From time to time, issues of law arise and the jury is asked to withdraw," explained Mr Justice McCarthy.
He said he had considered the matter overnight and had given his judgment to both sides.
He said that, if that was the sole evidence, the accused had to be acquitted.
The jury forewoman signed the issue paper and Zambra walked free.