Walter Palmer admitted to killing Cecil the lion in July but has always denied that he acted illegally.
Zimbabwe's Environment Minister Oppah Muchinguri said he could not be charged as all his "papers were in order".
Mrs Muchinguri said Zimbabwe would now review how it issues hunting licences.
The environment minister had previously called for Mr Palmer to be extradited and face prosecution. However, it appears that Mr Palmer broke no laws when he killed the lion using a bow and arrow.
The environment minister had previously called for Mr Palmer to be extradited and face prosecution. However, it appears that Mr Palmer broke no laws when he killed the lion using a bow and arrow.
"We approached the police and then the Prosecutor General, and it turned out that [Walter] Palmer came to Zimbabwe because all the papers were in order," Mrs Muchinguru said.
Meanwhile the trial against Mr Palmer's Zimbabwean guide, Theo Bronkhurst, is due to continue on Thursday.
Mr Bronkhurst denies the charge of "failing to prevent an illegal hunt".
Meanwhile the trial against Mr Palmer's Zimbabwean guide, Theo Bronkhurst, is due to continue on Thursday.
Mr Bronkhurst denies the charge of "failing to prevent an illegal hunt".
The 55-year-old is believed to have paid $50,000 (£32,000) to hunt the lion in Zimbabwe's largest game reserve.
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