Boris Johnson will not face a criminal investigation into his dealings with US businesswoman Jennifer Arcuri when he was Mayor of London.
The Independent Office for Police Conduct said in its report that there was "some evidence" the pair had an "intimate relationship".
But there was no evidence Mr Johnson had influenced payments to Ms Arcuri or her companies.
The prime minister has always denied any wrongdoing.
His spokesman said: "We welcome the fact that this politically-motivated complaint has been thrown out.
"Such vexatious claims of impropriety in office were untrue and unfounded."
The spokesman added that it was "not a policing matter, and we consider this was a waste of police time".
The PM now faces a separate inquiry by the Greater London Assembly into allegations of conflict of interest during his time as London Mayor, between 2008 and 2016.
The Assembly investigation had been put on hold until the IOPC published its findings.
Mr Johnson was referred to the police watchdog in September over allegations of misconduct in a public office, as the role of the mayor of London is also London's police and crime commissioner.
The investigation was sparked by a report in the Sunday Times that Ms Arcuri joined trade missions he led, and that she received thousands of pounds in sponsorship grants.
IOPC Director General Michael Lockwood said: "While there was no evidence that Mr Johnson influenced the payment of sponsorship monies or participation in trade missions, there was evidence to suggest that those officers making decisions about sponsorship monies and attendance on trade missions thought that there was a close relationship between Mr Johnson and Ms Arcuri, and this influenced their decision-making."
The review "established there was a close association between Mr Johnson and Ms Arcuri and there may have been an intimate relationship", the watchdog said.
It said that if Mr Johnson was in an intimate relationship with Ms Arcuri, "it would have been wise for him to have declared this as a conflict of interest".
But the GLA's code of conduct at the time meant that he was under no obligation to do so, the watchdog says, and it recommends a series of measures to tighten up the code.
The IOPC said its review had taken longer than expected because some of the records it had wanted to see "either never existed or have been deleted".
Len Duvall, leader of the Labour group on the London Assembly and chair of the GLA's oversight committee, said: "The IOPC was looking specifically at whether he committed a criminal offence.
"That's not our remit and their decision doesn't have any real bearing on our investigation, which will focus on his conduct as Mayor of London."
The Assembly's investigation will look at whether Mr Johnson "conducted himself in a way that's expected" from a senior public official, said Mr Duval.
But the Conservative MP for Orpington in South London, Gareth Bacon, said: "Labour politicians in City Hall have wasted police time with malicious complaints.
"They now want to waste taxpayers' money with more petty and partisan point scoring."
In October last year, an internal government review found "no impropriety" in a 2019 decision by the Department for Culture, Media and Sport to award a £100,000 grant to Hacker House, a company owned by Ms Arcuri.