A suspect in the 1984 murder of police office Yvonne Fletcher will not be prosecuted and has been released from bail.
Issues surrounding evidence and national security mean the Libyan national, who is in his fifties, will not be further investigated.
Pc Fletcher was shot dead as she policed a demonstration against Colonel Muammar Gaddafi outside the Libyan People's Bureau in St James's Square on April 17, 1984.
Following the shooting, the embassy was besieged by police for 10 days before 30 occupants were deported back to Libya.
Scotland Yard announced the CPS decision not to prosecute on Tuesday, which Ms Fletcher's family said had left them "deeply disappointed and frustrated".
Nobody has ever been charged over the killing of Pc Fletcher, an incident which resulted in the deterioration of UK-Libya diplomatic ties.
A spokesman for the Met said: "We believe our investigation has identified enough material to identify those responsible for WPc Fletcher's murder if it could be presented to a court.
"However, the key material has not been made available for use in court in evidential form for reasons of national security.
"Therefore, without this material and following a review of all the evidence that was available to prosecutors, the Crown Prosecution Service, who we worked closely with throughout, have informed us that there is insufficient admissible evidence to charge the man."
Assistant Commissioner Mark Rowley said the decision was a cause of "regret" for him.
Reacting to the announcement, Ms Fletcher's family described themselves as "deeply disappointed and frustrated".
A family statement said: "We understand that some available evidence could not be used in court but are satisfied that the Metropolitan Police has left no stone unturned in its pursuit of justice in Yvonne's case.
"The family would like to thank the Met for its continued hard work and diligence and also for always keeping us informed at every turn.
"We are deeply disappointed and frustrated that a prosecution cannot proceed at this time.
"We had hoped that the latest turn of events would finally lead to some closure for the family."