Labour peer Lord Janner will not face child sex abuse charges because the severity of his dementia makes him unfit to stand trial, the Crown Prosecution Service (CPS) has said.
The abuse allegations relate to residents in Leicestershire children's homes between 1970 and the 1980s.
Police condemned the CPS decision as "wrong", and the Labour Party has suspended the 86-year-old peer.
Lord Janner "is entirely innocent of any wrongdoing", his family has said.
A retired High Court judge will now review the CPS's handling of the case.
More than a dozen individuals made allegations to police relating to Greville Janner, the CPS said.
The "core allegation" was that as MP for Leicester West at the time, Lord Janner befriended the manager of a children's care home to allow him access to children so he could "perpetrate serious sexual offences on children", the CPS said.
Leicestershire Police interviewed more than 2,000 people throughout the course of their investigation, and a "comprehensive file of evidence" was submitted to the CPS.
In a statement, Director of Public Prosecutions Alison Saunders said there was enough evidence to charge him with:
- Fourteen indecent assaults on a male under 16 between 1969 and 1988
- Two indecent assaults between 1984 and 1988
- Four counts of buggery of a male under 16 between 1972 and 1987
- Two counts of buggery between 1977 and 1988
She said the CPS were "wrong" not to prosecute the Cardiff-born peer following investigations in 1991 and 2007.
"The police made the decision not to pursue Greville Janner in 2002, which again we have looked at and in our view it was wrong," she told the BBC's World at One.
"There are real lessons to be learnt... if we had the evidence we now have earlier, I think the position would have been very different when Greville Janner's medical condition was not as it is today," Ms Saunders said.
Lord Janner was diagnosed with Alzheimer's disease in 2009, the CPS said.
Assistant Chief Constable Roger Bannister of Leicestershire Police said the force had invited the Independent Police Complaints Commission (IPCC) to look into "what happened in the early 2000s" and inquiries are ongoing.
"Why was the decision different? Could it have been? Should it have been? If that's the case then I would be the first to say that's regrettable," ACC Bannister said.
Last year a former detective sergeant with Leicestershire Police, Mick Creedon - now chief constable of Derbyshire Police - told a national newspaper that in 1989 he was ordered not to arrest Lord Janner and not to search his home.
Responding to the CPS's decision, the force said it was "worried" about its impact.
ACC Bannister said he believed it was "the wrong one" and it would do little to support and encourage victims of sexual abuse to come forward.
He said: "I am extremely worried about the impact the decision not to prosecute him will have on those people [who came forward].
"More widely I am worried about the message this decision sends out to others, both past and present, who have suffered and are suffering sexual abuse.
"We are exploring what possible legal avenues there may be to challenge this decision, and victims themselves have a right to review under a CPS procedure."
One man, whose claims that he was assaulted by the peer were investigated by Leicestershire Police, said the decision was a disgrace and "if he was an everyday person with a normal life and job, justice would [have] been served".
Shadow Chancellor Ed Balls has said Labour "acted swiftly and decisively" to suspend Lord Janner from the party following the CPS announcement.
He said the allegations were "very serious" but he understood the CPS's decision.
But Sir Clive Loader, Leicestershire Police and Crime Commissioner, said the decision was "not just wrong" but "wholly perverse" and "contrary to any notion of natural justice".
Explaining its decision, the CPS said there is no treatment for Lord Janner's condition and there is no current or future risk of offending.
His condition is "rapidly becoming more severe" and requires continuous care both day and night, the statement said.
"His evidence could not be relied upon in court and he could not have any meaningful engagement with the court process, and the court would find it impossible to proceed."
Ms Saunders said the decision will be "extremely disappointing to complainants" and she has written to all of them.
Last year the CPS announced it was considering evidence against Lord Janner as part of an inquiry into allegations of historical child abuse.
The investigation was linked to Frank Beck, who was found guilty of sexually and physically abusing more than 100 children in the 1970s and 1980s.
Beck, who ran children's homes in Leicestershire, was given five life prison sentences and died in jail.
Clive Coleman, BBC Legal Correspondent
The Code for Crown Prosecutors says that, when assessing if a prosecution is in the public interest, consideration should be given "as to whether the suspect is, or was at the time of the offence, suffering from any significant mental or physical ill health as in some circumstances this may mean that it is less likely that a prosecution is required".
If they cannot understand the difference between guilty and not guilty, cannot give instructions to their lawyers and so cannot test the evidence against them, prosecutors will not generally charge them.
That is small comfort to the alleged victims of Greville Janner, but it is the system operating to ensure that the mentally frail do not face unfair trials that they cannot comprehend.
An NSPCC spokesman said "something went badly wrong" in the way the allegations were handled and "we need to be reassured this will never happen again".
In a statement Lord Janner's family described him as a "man of great integrity and high repute with a long and unblemished record of public service".
"As the Crown Prosecution Service indicated today, this decision does not mean or imply that any of the allegations that have been made are established or that Lord Janner is guilty of any offence," the family said.
In 1991, Lord Janner made statements in Parliament asserting his innocence after a man claimed he had abused him.
He will remain a member of the House of Lords until his death or until he formally retires under reforms passed last year.
Retired High Court Judge Sir Richard Henriques will conduct an independent review into the CPS's decision making and how it handled the case, she said.