Invalidate Caches and Restart did not work for me. I also updated all my Android Studio files with no success.
The solution I found was importing the android folder by clicking "Import project (Eclipse ADT, Gradle, etc.)" rather than clicking "Open an existing Android Studio Project" or dragging the folder onto the app icon.
Apparently the problem is caused because a module in the project has an *.iml file that does not contain external.system.id="GRADLE".
When you import the project (as opposed to opening it), the iml files are completely re-written, thus removing the error.
I found the info here: https://issuetracker.google.com/issues/37008041