The Independent Police Conduct Authority (IPCA) says police were justified in closing the Todd Barclay secret recording investigation.
The original investigation was dropped after 10 months with officers citing a lack of evidence for a successful prosecution.
They received a complaint last month from someone not directly involved in the investigation, but in a statement on Tuesday morning said there was no neglect of duty.
Police re-opened the investigation into the Clutha-Southland MP following a period of intense media scrutiny last month.
Mr Barclay announced in June that he would be standing down at the end of his current term in Parliament.
It was revealed last month that a payment of taxpayer money had been made to settle an employment dispute in Mr Barclay's office, after he allegedly secretly recorded staff member Glenys Dickson.
Mr Barclay told Prime Minister Bill English that he made the recording, and Mr English admitted that he spoke to police about it in April 2016.
Police are also looking at National Party board member Glenda Hughes' role in the saga, as she has been alleged to have urged Ms Dickson to withdraw her complaint.