Lawyers representing families of dead Iraqis admitted there was "insufficient evidence" to back their claims British soldiers unlawfully killed civilians nearly a decade ago.
However, PIL said there were still allegations of mistreatment of prisoners for the inquiry to consider.
The Al-Sweady Inquiry is examining allegations British troops mistreated and killed 20 or more Iraqi detainees after the Battle of Danny Boy in May 2004. The MoD has vigorously denied the claims, saying any deaths occurred on the battlefield.
Claims that British troops unlawfully killed Iraqis a decade ago have been dropped by the families of the deceased who admitted there was "insufficient evidence."
On the last full day of evidence at the year-long Al-Sweady Inquiry, Public Interest Lawyers, who are representing the families of the deceased, said there had been "insufficient evidence" to back their allegations that civilians were killed while in British troops' custody in May 2004.
PIL said it came to the decision after the end of military evidence and "the current state of disclosure by the Ministry of Defence".
The inquiry has heard evidence from hundreds of witnesses both here and abroad, at a cost of more than £22 million.
Allegations British soldiers unlawfully killed Iraqi civilians a decade ago are not supported by evidence heard by a public inquiry investigating their deaths, a lawyer acting for the families of the dead told the Al-Sweady Inquiry in London today.
The inquiry has been examining claims that UK soldiers murdered 20 or more Iraqis, and tortured detainees after the "Battle of Danny Boy" in Maysan Province, southern Iraq, in May 2004.
Around 15 Iraqis are being flown to the UK to give evidence to the Al-Sweady inquiry following allegations that British soldiers murdered and tortured detainees during the Iraq War.
Starting this week, they will include detainees Madhi Jassim Abdullah and Atiyah Sayid Abdelreza, as well as Mizal Karim Al-Sweady, the father of 19-year-old alleged victim Hamid, who the inquiry is named after.
A further 45 Iraqis are due to give evidence via videolink from Beirut, Lebanon, and evidence from military witnesses is expected to start in September.
The inquiry is unlikely to be finished before the end of next year.
A group of Iraqis will this week give evidence to the public inquiry into claims that British soldiers committed murder and torture during the Iraq War.
The Iraqi detainees who claim they were mistreated - and the family of those allegedly unlawfully killed - will begin giving evidence to the Al-Sweady Inquiry in the same week that marks the 10th anniversary of the war.
The inquiry is examining claims that UK soldiers murdered Iraqis and tortured others after the "Battle of Danny Boy'' in southern Iraq's Maysan Province in May 2004 - claims denied by the Ministry of Defence (MoD).
It is alleged that Iraqis were unlawfully killed at Camp Abu Naji (CAN) on May 14 and May 15, 2004, and that five Iraqi detainees were tortured and ill-treated both at CAN and at Shaibah Logistics Base, where they were held for the next four months.
The MoD vigorously denies the allegations. It says those who died were killed on the battlefield.