Police first received a complaint about Andrew Rosindell in January 2020 and arrested the Romford MP in May 2022.
He was banned from attending the Parliamentary estate and could not speak in the Commons chamber or vote while the investigation was ongoing.
Mr Rosindell’s office confirmed that the case had been dropped.
“In relation to an allegation made in May 2022 by an individual against Andrew Rosindell the Metropolitan Police have conducted a thorough investigation and concluded that there was no case to answer and that no further action would be taken,” his spokesman said.
“Andrew has been completely exonerated. He has been working constantly for Romford throughout the past twenty-one months and will continue to speak up for the people of his beloved home town as their local MP.”
A Met Police spokesman added: “In January 2020, the Met received a report relating to alleged sexual offences having being committed in London between 2002 and 2009.
“A man, aged in his 50s, was arrested in May 2022 on suspicion of indecent assault, sexual assault, rape, abuse of position of trust and misconduct in public office.
“A thorough investigation has been carried out by detectives. They concluded that the evidence did not meet the threshold set by Crown Prosecutors.
“The man has been informed he will face no further action.”
Mr Rosindell was bailed six times by police during the force’s investigation.
He has been campaigning in his constituency and was reselected as the Tory candidate to stand in Romford at the general election.