Gunnar Axén, a member of parliament since 1998, has been on a "timeout" from politics since he was formally named as a suspect in the investigation two weeks ago. He has continually denied the allegations since they emerged in October.
On Monday, head prosecutor Mats Ericsson explained that there are two versions of what happened in the case and that he's unable to prove that a crime took place.
He explained that there is a lack of supporting evidence to back up the story of the victim, said to be an 18-year-old female member of the Moderates' youth wing.
Ericsson said he can't get into specifics about the alleged actions that led to the initial police report because "it's about two people's specific circumstances" and is covered by confidentiality requirements.
"I can't offer up any more information than this, because if I try to start explaining why I've made this ruling, then I start to get into an area that I can't say anything about," he told the TT news agency.
He added that no new information has emerged in the investigation since Axén was formally named as a suspect.
"He was interviewed last Friday and I was told what he said and he denies it," said Ericsson, who explained that the case boiled down to one person's word against the other's.
Axén's lawyer Per E Samuleson wasn't surprised by the news.
"I said prior to the interrogation that I'd be surprised if charges were filed," he told TT, adding the accusations "wouldn't hold up in court".
He added that his client was "naturally relieved" upon learning the case would not proceed to trial.