The society yesterday said it had taken the "regrettable" decision to clean the slate for hundreds of lawyers found guilty of unsatisfactory conduct in the past three years.
The body took the decision to withdraw the "unsatisfactory conduct" charge after a disciplined lawyer launched a bid to overturn the ruling.
Opposition MSPs last night branded the situation a "disaster" and said it made the case for a root-and-branch review of the way lawyers are policed vital.
The Scottish Legal Services Ombudsman, meanwhile, said the regulation of solicitors was "a muddle" and urgently called for fresh legislation.
The origins of the controversy go back to January 2003, when the society decided to mark an "unsatisfactory conduct" finding on lawyers' records as a disciplinary halfway house between professional misconduct - which is already founded in law - and taking no action.
The move came after the Legal Services Ombudsman said such sanctions were worthless unless they were formally held against the guilty solicitor.
But the society has admitted it was aware new legislation was needed to uphold the charge, and says it previously called on the Scottish Executive to bring in the necessary powers.
Since early 2003, around 300 unsatisfactory conduct findings have been made against 200-250 lawyers. It is understood some were unhappy at the way the sanction was imposed and, earlier this year, one of those was granted a judicial review into the reprimand.
This led the Law Society to seek advice on the validity of the sanction, and officials were told it could not be upheld.
Among the lawyers who disputed the sanction was Aamer Anwar, who threatened to take the Law Society to court after he was disciplined for branding a caller on a radio phone-in programme a "bigot".
Philip Yelland, director of client relations at the society, said: "We took advice at the time and decided to go down this road in good faith. But the challenge came in and we took further advice.
"The legal position has changed over the years, so we were advised that we had to do what we have done."
Ironically, the society will be given powers in relation to unsatisfactory professional conduct under the Legal Profession and Legal Aid (Scotland) Bill, expected to become law next year.
The bill also proposed a legal complaints commission, which will controversially strip the society of part of its regulatory function.
And in a further blow to the Society it emerged earlier this month that lawyers across the country were plotting to create a new national association, after the society agreed to accept a legal aid pay deal many of them were unhappy with.
Margaret Mitchell MSP, the Scottish Tories' justice spokeswoman, said: "This latest disaster has strengthened the case for reviewing the whole set-up."