Liberal Democrat leader Nick Clegg has insisted the "party has changed" after Lord Rennard had his membership suspension lifted.
Mr Clegg said the party had taken a "hard look in the mirror" since sexual harassment claims against the former Lib Dem chief executive first emerged.
Lord Rennard was suspended for bringing the party into disrepute after failing to apologise over the allegations.
But disciplinary action was dropped and the matter declared closed on Tuesday.
Business Secretary Vince Cable said the issue had been "very painful" for the party.
In a statement, Lord Rennard said he was "pleased" and pointed out that none of the allegations against him had been proven.
"I remain a committed member of the Liberal Democrats and a strong believer in the principles of the party, as set out in the constitution, and based on the values that led me to join the Liberal Party in my teens," he said.
He had initially refused to apologise over the allegations by four female activists last year. However, he later expressed regret, conceding that he may have "inadvertently" encroached upon "personal space".
By Iain Watson, BBC political correspondent
The long-running disciplinary process inside the Lib Dems wasn't just about the reputation of one man - it was about the reputation of the party itself.
The result of the independent investigation by a QC into allegations of sexual harassment produced the worst possible political outcome - the women's evidence was said to have been broadly credible, but the allegations weren't proven beyond reasonable doubt.
That led to the complainants claiming the party wasn't taking their concerns seriously, while it made Lord Rennard at first wary of apologising for what he later called inadvertent encroachment of personal space - in case that appeared to be an admission of guilt.
So the new disciplinary proceedings that followed his initial failure to say sorry also led to further bad headlines for the Lib Dems.
And despite Lord Rennard's subsequent apology, some of his accusers continued to press for his expulsion from the party.
Party officials knew a line had to be drawn under the row well before the election.
But if they had hoped for a muted reaction by announcing Lord Rennard's reinstatement during the parliamentary recess, their wishes haven't been fulfilled.
As Lord Rennard's suspension was lifted, the deputy prime minister pledged a root-and-branch review of his party's culture and processes.
He also signalled plans to reduce the burden of proof in party disciplinary cases, which currently require guilt to be established - as in criminal trials - beyond reasonable doubt.
"The Liberal Democrats have taken a long, hard look in the mirror since these allegations were made last year and I am confident that the party has changed," Mr Clegg said.
"It is clear that a number of women in our party felt let down that the party failed to act on their complaints appropriately. I am determined that no member of our party should find themselves in that position again."
Mr Cable told the BBC: "We've spent 14 months on this. It's been very difficult, very painful, particularly for the women who were involved. But the decision's been made that there was no evidence to pursue an expulsion of Lord Rennard."
The lifting of Lord Rennard's suspension quickly drew criticism, including from his complainants.
Susan Gaszczak, one of the women who made claims against him and who quit after the party refused to expel him, said the Lib Dems had "no backbone".
In a statement, she added: "The party democracy obviously has no moral compass. They say we are credible, then fail to act on it and don't see the impact this has on women and women voters."
Another complainant, Alison Goldworthy, said: "Faced with the opportunity to take strong action, the Liberal Democrats have once more failed to act.
"That is quite wrong. It is an outcome of which the party should be ashamed."
In January, a party inquiry by independent barrister Alistair Webster QC concluded that there should be no further action against Lord Rennard, saying that while "broadly credible", the claims could not be proved beyond reasonable doubt.
A Lib Dem spokesman confirmed on Tuesday that the Regional Parties Committee had considered Mr Webster's report and decided not to proceed with disciplinary action against Lord Rennard.
"This brings the matter to a close and means the suspension of his membership is lifted," the spokesman said.
Gloria De Piero, Labour's spokeswoman for women and equalities, said Mr Clegg had sent a clear message to women voters - that he was "more interested in trying to salvage the Lib Dems' fading election hopes than doing the right thing by the women who made these serious complaints".