The Ivory Coast star could have faced a three-match ban but the three-man panel of former elite referees which reviewed the incident did not unanimously believe it was an act of violent conduct.
That will come as a huge relief to City boss Manuel Pelligrini as his club chase the Premier League and FA Cup trophies.
It will however, infuriate Jose Mourinho, manager of City's main title rivals Chelsea, who claimed if Toure was not suspended it would give carte blanche to other players to misbehave.
Mourinho said: "If he [Toure] is not suspended, the message is clear: the players can do what they want if the referee doesn't see.
"If there's no suspension, the message is normally that, if the FA defends football, he'd have to be suspended.
"It's the same for everyone: if the referee doesn't see, I can do whatever. It doesn't matter about cameras or others seeing. I can do whatever I want."
A suspension for Toure would have come as a hammer blow to City's title hopes after Pelligrini's side dropped two points at Norwich on the back of losing to current Premier League leaders Chelsea.
Toure, arguably City's most influential this season, will now be available for Wednesday's game against Sunderland, the FA Cup fifth round match against Chelsea at the weekend, and the league fixture against Stoke.
Norwich boss Chris Hughton claimed Toure did kick his player, though said it was a "mininal incident".
The clash happpened during the 0-0 draw at Carrow Road and appeared to be missed by match officials. Hughton said: "It did go unnoticed and there was no doubt there was a slight kick out.
"There was certainly something, but whether that was enough for a red card, then that is for the referee to decide on.
"It was a minimal incident in the game, and the bigger factor was it was a good team performance by us."
The decision to clear Toure is more good news for City, with the injured trio of Sergio Aguero, Samir Nasri and Fernandinho all taking part in a training session on Monday.