Jackie Powell was held on suspicion of preventing the lawful burial of Keith Bennett after she told a TV documentary Brady had given her a sealed envelope to pass to Winnie Johnson, Keith's mother, in the event of his death.
The letter was never found and Mrs Johnson died last August not knowing where her son was buried.
John Dilworth, head of the CPS North West Complex Case Unit, said: "After careful consideration, we have decided Ms Powell should not be charged, as it cannot be established that she knew the contents of the letter referred to, that the letter in question existed or what information it might have contained."
Martin Bottomley, head of investigative review in Greater Manchester Police's major and cold case crime unit, said: "Despite seizing numerous documents and a search of Brady's cell, no such letter has been recovered.
"That in itself does not prove or disprove the letter's existence.
"It might have been destroyed, it might be hidden elsewhere, it may be in someone else's possession, or it may simply never have existed in the first place and this has been yet more mind games by Brady."