Press Association reporter Laura Elston, who was arrested last month by police investigating allegations of phone hacking by journalists, will face no further action, her lawyer said today.
Laura Elston was detained for several hours on 27 June when she voluntarily attended an appointment at a central London police station.
Scotland Yard said she was questioned on suspicion of intercepting communications, contrary to Section 1 of the Regulation of Investigatory Powers Act (RIPA) 2000.
But today her solicitor David Corker was informed that she faced "no further action".
He added: "She has been dropped from the inquiry."
Elston, 34, who works as a royal reporter, was originally released on police bail until October.
PA editor Jonathan Grun said: "Laura Elston is a journalist of integrity who has had a distinguished career since joining us as a trainee more than a decade ago.
"We are pleased that this matter has been cleared up."
The mother-of-two joined the agency as a graduate trainee in 2000 and has worked for PA ever since.
She was interviewed by detectives assigned to Operation Weeting, an investigation launched by the Metropolitan Police in January following new allegations about phone hacking involving the News of the World.
The Metropolitan Police later released a statement confirming the decision.
It said: "A 34-year-old woman arrested by officers from the MPS's Operation Weeting team on 27 June, 2011, has today had her bail cancelled and informed there will be no further action against her.
"The Operation Weeting team is conducting the new investigation into phone hacking. The investigation continues and it would be inappropriate to discuss any further details regarding this case at this time."
PA Group chief executive Clive Marshall welcomed the decision, saying:
"We are delighted that this matter has been brought to an end and that Laura Elston and the Press Association have been completely exonerated.
"Our extensive internal inquiry into this matter found no trace of wrong-doing and we have always been confident of Laura's innocence.
"For 143 years PA has been committed to fact-based news reporting and this ethos is more important in today's media landscape than ever before."