Kevin McLeod, 24, was found in Wick harbour in Caithness in February 1997 after a night out.
Police said at the time his death was accidental, but his family believed he was murdered and consistently criticised the force for its handling of the case.
Concerns were raised around a failure to keep and submit Mr McLeod’s clothing and not acknowledging marks on his body at an early stage of the inquiry.
It led to a review by a police watchdog, which said the then Northern Constabulary behaved with ‘’institutional arrogance’’ in the way it handled complaints from Mr McLeod’s parents Hugh and June.
Earlier this year, Police Scotland said it was “assessing the information” from the case but has now concluded there is no evidence “which would clearly indicate the circumstances surrounding the cause of Kevin’s death, either criminally or accidentally”.
The force remains “fully committed” to investigate any new evidence that may come to light.
Deputy Chief Constable Iain Livingstone, currently the most senior officer in the force, met with Mr McLeod’s parents on Friday and apologised over the handling of the case by the former Northern Constabulary.
Mr Livingstone said: “I have today met with Mr and Mrs Mcleod to personally apologise for the policing response to their son Kevin’s death in 1997.
“The tragic events leading to the recovery of Kevin’s body from Wick Harbour left Mr and Mrs Mcleod with a 20-year search for answers.
“I can only imagine the pain and trauma their family has suffered and I have nothing but the highest admiration for their strength and determination in seeking those answers.”
Mr McLeod, who was an electrician, was last seen in the early hours of February 8 1997, as he enjoyed a night out with friends.
His body was recovered from the sea the following day.
After the initial review, former Northern Constabulary chief constable Ian Latimer said the force ‘’had rewritten the crime management handbook’’ in the wake of the case.
Mr Livingstone said the family’s belief there were serious failings had been substantiated by a number of reviews.
He added: “There is no doubt that basic policing procedures were never carried out and the opportunity to gather vital evidence was missed.
“Legacy policing services undoubtedly failed this family and I am further disappointed that their complaints were treated in a dismissive manner in the years which followed Kevin’s death.
“During a recent comprehensive reassessment of this case Police Scotland has come to the conclusion that, because of the initial police investigation failures and based upon the evidence now available, we are unable to present any evidence which would clearly indicate the circumstances surrounding the cause of Kevin’s death, either criminally or accidentally.
“Kevin’s death remains as unexplained, as directed by the Crown Office and Procurator Fiscals Service. Police Scotland is fully committed to investigating any new evidence which may come to light.
“I fully understand that such a conclusion must be difficult for Kevin’s family to accept and on behalf of the policing service I regret the pain and anguish that this has caused them over such a long period of time.
“I hope that this unreserved apology may go some way to bring some form of closure to Kevin’s family and once again on behalf of Police Scotland I apologise unreservedly for the past failings of the police services in Scotland.”