John Travolta is officially off the hook in an alleged high seas assault -- the cruise ship employee who sued him agreed to drop the matter ... just 2 days after a judge ruled the case would be argued in open court.

As TMZ first reported, Fabian Zanzi sued Travolta last June ... accusing the actor of exposing his penis in his stateroom, and hugging Zanzi during a 2009 Royal Caribbean cruise.

But on Friday a federal judge shut down Travolta's attempt to handle the case in arbitration, instead of going to trial. The judge's decision essentially left Travolta's attorneys with 2 options -- go through a messy public trial ... or reach a settlement with Zanzi.

The case was dismissed on Monday, but terms were not disclosed -- so it's unclear if Travolta made a financial settlement with Zanzi.

A federal judge cleared the decks for John Travolta's legal battle with a cruise ship employee -- who claims the star exposed himself -- to play out in open court.

On Friday the judge shut down an argument from Travolta's attorneys that his ticket for the 2009 Royal Caribbean cruise liner included an agreement to settle all disputes between a passenger and the company through arbitration.

As TMZ first reported ... cruise ship steward Fabian Zanzi sued Travolta last June -- claiming the actor exposed his penis in his stateroom and forcibly embraced Zanzi after asking him for a neck massage.

In Friday's ruling, the judge basically said there's no evidence Zanzi is bound by the arbitration agreement between Travolta and Royal Caribbean.

The upshot is this could be headed for trial unless a settlement is reached -- which is common in cases where one side wants to avoid a public trial. So, the judge blocking arbitration also effectively drives up the price on a potential settlement ... though we don't know that's happening in this particular case.

Travolta's attorney has called Zanzi's suit a "ludicrous" attempt to grab "15 minutes of fame" -- and believes Travolta will be "completely vindicated in court."

John Travolta has fired back at the cruise ship worker who claims Travolta sexually assaulted him in 2009 ... filing docs yesterday claiming the worker is LYING and made the whole sordid story up.

As TMZ first reported, Fabian Zanzi claims that Travolta exposed himself during a neck massage aboard a Royal Caribbean cruise ... and offered to pay him $12,000 to keep the incident quiet. Zanzi detailed his allegations back on video in June (see below).

In court docs filed yesterday by legal pitbull Marty Singer ... Travolta admits to being on the cruise ... but denies all the allegations of misconduct against him.

Travolta also reiterates his point that Zanzi filed a report with Royal Caribbean over the alleged incident when it happened ... but failed to mention any of the sexual details.

Travolta wants the lawsuit dismissed and for Zanzi to pay his attorney's fees.