The decision was made after Scotland Yard assessed Lord Dyson's report into the 1995 BBC Panorama documentary, which saw BBC journalist Bashir do a sit-down interview with the Princess of Wales.
The Metropolitan Police said in a statement on Wednesday: “In March 2021, the Metropolitan Police Service determined it was not appropriate to begin a criminal investigation into allegations of unlawful activity in connection with a documentary broadcast in 1995.
“Following the publication of Lord Dyson's report in May, specialist detectives assessed its contents and looked carefully at the law - once again obtaining independent legal advice from Treasury Counsel as well as consulting the Crown Prosecution Service.
“As a result, the MPS has not identified evidence of activity that constituted a criminal offence and will therefore be taking no further action.”
Lord Dyson’s blistering report criticised the methods used by Mr Bashir to obtain his exclusive 1995 interview with the princess.
It said the journalist was in “serious breach” of the BBC’s producer guidelines when he faked bank statements and showed them to Diana’s brother Earl Spencer to gain access to the princess.
Both the Duke of Cambridge and his brother the Duke of Sussex issued strongly worded statements following the publication of the report, which found the broadcaster covered up “deceitful behaviour” used by Mr Bashir to secure his headline-making interview.
William and Harry condemned the BBC for its treatment of their mother, saying the interview fuelled her “fear, paranoia and isolation” and a wider “culture of exploitation and unethical practices ultimately took her life”.
Former BBC director-general Lord Tony Hall later said he was “deeply sorry” for the “hurt” caused by the interview scandal, but denied there had been a “BBC cover-up”.
The corporation has also since apologised to the whistle-blower who tried to expose Mr Bashir’s methods.
Graphic designer Matt Wiessler was sidelined by the corporation after raising concerns that fake bank statements he mocked up for Mr Bashir had been used by the journalist to persuade Diana to do the interview.