Ian Tomlinson, 47, died after being caught up in a demonstration outside the Bank of England where confrontations between anti-capitalist groups, environmental campaigners and riot police had broken out.
The newspaper-seller was walking slowly with his hands in his pockets away from a line of riot squad officers when one moved forward, hit him on the leg with a baton and then pushed him forcefully in the back.
Tomlinson collapsed shortly afterwards and died.
"After a thorough and careful review of the evidence, the Crown Prosecution Service has decided there is no realistic prospect of a conviction against the police officer in question for any offenses ... and no charges should be brought against him," said the Director of Public Prosecutions Keir Starmer.
He said conflicting medical evidence meant that a prosecution case could not be proved beyond doubt. The lawyer for Tomlinson's family said it was a disgraceful decision.
Tomlinson had been on his way home and had not been taking part in the protests which were held as leaders of the G20 nations gathered in the capital to discuss the global financial crisis.
ASSAULT
Starmer said Tomlinson had posed no threat to the police officer or his colleagues and that there was sufficient evidence to show that his actions had constituted an assault.
But he said a "sharp disagreement" between medical experts meant a successful prosecution for manslaughter was unlikely.
An initial post-mortem recorded that Tomlinson had died from a heart attack, but two further checks showed the cause of death to be internal bleeding.
"The CPS would simply not be able to prove beyond reasonable doubt that there was a causal link between Mr.Tomlinson's death and the alleged assault upon him," Starmer said.
He said other offenses were considered but ruled out, including a charge of common assault which Starmer admitted could not be brought as there was a six-month time limit.
"The CPS are clearly admitting that the police officer assaulted our dad — why is there no charge?" Paul King, Tomlinson's son told reporters.
"We feel very let down, very disappointed. Another copper has been let off. You ain't heard the last of us yet."
The family lawyer Jules Carey said they would consider appealing against the "disgraceful" decision.
"There needs to be an inquiry into exactly why nothing's happened today and what the failure is," he said.
The Metropolitan Police said it was waiting for the Independent Police Complaints Commission's (IPCC) report before deciding whether the officer should face misconduct proceedings.
In March, another riot squad officer Sergeant Delroy Smellie, who was captured on video footage hitting a woman with his metal baton during protests the day after Tomlinson's death, was cleared of assault after the judge accepted he had been acting in self-defense.
Hundreds of complaints were made about excessive violence by some officers during the G20 demonstrations on April 1 and 2, and the police's tactics have been widely condemned in reports by politicians, the IPCC and Her Majesty's Inspectorate of Constabulary.
