LOS ANGELES — Federal prosecutors have dropped charges against a Brooklyn Chassidic rabbi accused of sexually molesting a teen-age girl.

"We have dismissed the complaint [of sexually touching a minor] against Rabbi Israel Grunwald," Assistant U.S. Attorney Debra Yang said in a phone interview late last month. "As of today, there is nothing charged against him."

However, Yang added, she will continue her investigation into the case.

Grunwald and his assistant, Yehudah Friedlander, both 44, were arrested at Los Angeles International Airport May 31 after an overnight flight from Australia.

During the flight, a 15-year-old American girl complained that she had been fondled and groped by both men.

Friedlander, indicted by a federal grand jury on the more serious charge of sexually abusing a minor, is free on $200,000 bail.

His trial has been set for Aug. 8, though the date may be postponed to allow for more extensive investigation.

As a condition of his release on bail, Friedlander, who has declared his innocence, was placed under house arrest.

This restriction has now been modified to allow him to attend daily prayer services and work at Congregation Tuldos Yacov Yosef in the Borough Park section of Brooklyn, N.Y.

However, Friedlander will remain under electronic surveillance and has been forbidden any contact with minors, not including his five children.

Commenting on the dismissal of the charge against Grunwald, his attorney, Mitchell Egers, noted that the prosecution had been faced with two problems: Was the teen-age girl telling the truth, and could the charge be proved in court?

Grunwald leads a faction of some 100 Pupa Chassidim in Borough Park, where the original accusation was met with shock and disbelief.

He is the son of the late Josef Grunwald, the Hungarian-born founder and grand rabbi of the 12,000-member Pupa movement.

On the founder's death, the title devolved on his older son, Yakov Grunwald, who heads the main Pupa community in the Williamsburg section of Brooklyn.