Computer hacker Gary McKinnon will face no further criminal action, Director of Public Prosecutions Keir Starmer QC said today.
The move came three months after Home Secretary Theresa May stopped his planned extradition to the US.
Glasgow-born Mr McKinnon, who suffers from Asperger's syndrome, was permitted to stay in the UK on human rights grounds after medical reports showed he was very likely to try to kill himself if extradited.
The 46-year-old, of Wood Green, north London, would have faced up to 60 years in prison if convicted in the US.
Both Prime Minister David Cameron, who held talks on the case with President Barack Obama, and his deputy, Nick Clegg, previously condemned plans to send him to the US.
In an October statement, a spokeswoman for the US Department of Justice said: "The United States is disappointed by the UK Home Secretary's decision not to extradite Gary McKinnon, particularly given the past decisions of the UK courts and prior home secretaries that he should face trial in the United States.
"We note that the Home Secretary has described this case as exceptional and thus this decision does not set a precedent for future cases.
"The Home Secretary has acknowledged that Mr McKinnon is accused of serious crimes and that the United Kingdom's Director of Public Prosecutions will now consider whether Mr McKinnon has a case to answer in a UK court."