The development came days after the AAP leader regretted having accused Akali Dal leader Bikram Majithia of drug trade without evidence.
In a letter to Gadkari, Kejriwal said he was feeling sorry for making "certain statements, without regard to its verifiability, which seem to have hurt you...
"I have nothing personal against you. I regret the same. Let us put the incident behind us and bring the court proceedings to a closure."
He also suggested to the Union Shipping and Transport Minister that "we should put our energy to serve the people of this country in the spirit of mutual respect".
Consequent to the regret, Gadkari and Kejriwal later filed a joint application in the Patiala House Court, seeking withdrawal of the defamation case.
"Kejriwal has acknowledged that (the) complainant (Gadkari) was hurt on account of unverified allegations and expressed regret, in the larger public interest" and that "the complainant does not wish to pursue the defamation case", read the application.
In 2014, Gadkari had filed the defamation suit against Kejriwal after he named him in a list of "corrupt politicians".
Kejriwal has been dragged to courts in several defamation cases by various political leaders, including Finance Minister Arun Jaitley and former Delhi Chief Minister Sheila Dikshit.
Last week, the AAP leader wrote to Shiromani Akali Dal leader Bikram Majithia for accusing his of involvement in drug trade without any proof to back the allegations..
The apology triggered a virtual rebellion in the AAP Punjab unit, leaing to the resignation of Bhagwant Mann as its Punjab Unit chief.