The court had been told that Kate Knight, 32, torched the Prince of Wales pub after a row with her husband during a lock-in in July 2003.
Five children - including Mrs Knight's sons Charlie, four, and Christopher, 10 - were sleeping above the pub in north London as the blaze spread through the building.
The boys died after the fire, but two girls, aged eight and 11, were saved when one of the regulars, Ronnie Springer, braved the flames to rescue them.
Mr Springer later died from his burns, but a three-year-old child who had also been upstairs survived, despite sustaining serious burns.
Mrs Knight denied three charges of manslaughter and a charge of reckless arson. She had told the police who arrested her: "You have got it wrong. They were my babies."
She did not give evidence but the court heard that her husband, Kevin, was a convicted drug dealer and that there were rumours at the time he owed £25,000 to a prominent crime family.
It was suggested torching the pub was their way of "leaning on" Kevin Knight and also that a number of Mr Knight's enemies from the criminal underworld could have been responsible for the fire.
Lauren Soertsz, defending, said: "It is thought that the worst thing that can happen to a parent is for he or she to experience the death of a child. However, I would submit there is an event even worse than that of standing by your infant's graveside and that is for a loving parent to be accused of killing their own children."
The court was told the fire began as drinkers were enjoying a lock-in at the pub in Stoke Newington. Cleaning cloths were set alight near an outside door and stairs leading to living accommodation.
Mrs Knight, who had had an argument with her husband earlier, was the first to notice the fire. When Mr Springer and two other men opened the back door, they were confronted by what the prosecution described as "a wall of flame".
But the flames did not deter Mr Springer, the court heard. "Without sounding overdramatic he is the real hero of this whole story," said Dorian Lovell-Pank QC, prosecuting.
"Because of the intense heat no one could get up the stairs save for Mr Springer. He appeared at one of the windows with the two girls and he lowered them out of the window with the help of people already out there so that they were saved.
"He was heard to shout something like: 'It's too hot, I can't go back'. He literally fell from the window on to a bench, leaving the three boys inside," Mr Lovell-Pank said.
Christopher Knight died within the hour and Charlie died the next day, both from smoke inhalation and burns.
The eight-year-old girl suffered 31% burns and stayed in hospital for three months. The three-year-old boy suffered 50% burns and is still recovering. The other girl escaped relatively unscathed. Mr Springer, 45, underwent a number of operations before dying six weeks after the fire.
The judge, Mr Justice Fulford, gave his "wholehearted seal of approval" after being told that Mr Springer was being recommended for a posthumous award for bravery.
Detective Chief Inspector Matthew Horne said last night that police would "vigorously pursue" any new information about the crime.
