Horman dropped her motion only after learning her estranged husband's lawyer intended to bring on extensive discovery, "multiple depositions" and subpoenas for their client's medical records, The Oregonian reports.
The judge granted the dismissal, leaving a restraining order in place so that Terri is prohibited from having any contact with Kiara.
When Terri sought supervised visits with their daughter, Kaine Horman signed an affidavit in which he called his wife an "emotionally disturbed individual" who suffered from alcohol abuse since Kiara's birth.
But Terri Moulton Horman's lawyers left the door open for their client to resubmit the motion later, saying that she only wants to "act in Kiara's best interest," and stating that she did not give up her right to seek "legal custody and unfettered contact with Kiara."
Kyron vanished June 4 from his Portland, Ore.-area school. He was reportedly last seen by Terri, who has become a focus of the investigation.
Meanwhile, police in Oregon have continued to push on the case, with sheriff Dan Staton saying recently that "there will be things that will come out of this investigation that will surprise you, that you'll think about later on, after it's over," he said.
A Jan. 6 hearing is currently scheduled to reconsider Terri's request to delay her divorce proceedings.