Senior Liberal Democrat Lord Rennard will not face any charges following the claims of sexual harassment made against him earlier this year.
The Metropolitan Police announced there was insufficient evidence to prosecute Rennard, the party's former election supremo, who has always denied the claims.
The 52-year-old peer was first referred to the police in February after several women complained about suffering improper sexual advances from him. He was interviewed under caution in June after voluntarily attending a police station in south London.
Rennard, who has previously served as the Lib Dems' chief executive, greeted the announcement by saying: "I am not surprised by the police decision that after a full investigation into the complaints made against me I will face no charges.
"The last eight months have been harrowing and deeply unpleasant for me, my wife Ann, my family and friends.
"I am enormously thankful for the unfailing support I have received from people across the political spectrum but especially those within the Liberal Democrats who have stood by me throughout.
"My life's work has been to support good people and good causes. I hope now to be able to continue doing that."
However a Liberal Democrat spokesman revealed the party's own internal inquiry would now re-start, despite the police's decision.
"The decision by the police not to prosecute Lord Rennard with a criminal offence means that the party's disciplinary process, led by Alistair Webster QC, can now resume," the spokesman said.
"We consider the allegations made against Lord Rennard, which he strenuously denies, to be extremely serious and we can now continue with our internal inquiry into these allegations."
'Angry and outraged'
The initial news of the affair sent shockwaves through the party, which launched two internal investigations, and caused problems for Nick Clegg.
The deputy prime minister first claimed to know nothing about the previous allegations against his friend, but later admitted his office was aware of "indirect and non-specific" concerns about Rennard's conduct in 2008.
He was forced to deny there had been any cover-up, declaring: "I am angry and outraged at the suggestion that I would not have acted if these allegations had been put to me. Indeed, when indirect and non-specific concerns about Chris Rennard's conduct reached my office in 2008, we acted to deal with them."
The incident sparked a bout of soul-searching within the party and cast a shadow over its campaign in the Eastleigh by-election in February, although the party held onto the seat.