The 75-year-old had been accused a sex crime involving a young boy at a concert for the evangelist Billy Graham in the 1980s.
In a statement the Crown Prosecution Service said it had "carefully reviewed" the allegations and there was "insufficient evidence to prosecute".
It reviewed claims made by four men dating back to between 1958 and 1983. They've all been told about the decision in writing.
Sir Cliff Richard said he is "obviously thrilled that the vile accusations and the resulting investigation have finally been brought to a close".
In a statement, Sir Cliff said: "After almost two years under police investigation I learnt today that they have finally closed their enquiries.
"I have always maintained my innocence, co-operated fully with the investigation, and cannot understand why it has taken so long to get to this point! Nevertheless, I am obviously thrilled that the vile accusations and the resulting investigation have finally been brought to a close.
"Ever since the highly-publicised and BBC-filmed raid on my home I have chosen not to speak publicly. Even though I was under pressure to 'speak out', other than to state my innocence, which was easy for me to do as I have never molested anyone in my life, I chose to remain silent.
"This was despite the widely-shared sense of injustice resulting from the high-profile fumbling of my case from day one. Other than in exceptional cases, people who are facing allegations should never be named publicly until charged.
"I was named before I was even interviewed and for me that was like being hung out like 'live bait'. It is obvious that such strategies simply increase the risk of attracting spurious claims which not only tie up police resources and waste public funds, but they forever tarnish the reputations of innocent people.
"There have been numerous occasions in recent years where this has occurred, and I feel very strongly that no innocent person should be treated in this way.
"I know the truth and in some peoples' eyes the CPS' announcement today doesn't go far enough because it doesn't expressly state that I am innocent; which of course I am. There lies the problem.
"My reputation will not be fully vindicated because the CPS' policy is to only say something general about there being 'insufficient' evidence.
"How can there be evidence for something that never took place! This is also a reason why people should never be named publicly until they have been charged unless there are exceptional circumstances.
"To my fans and members of the public, to the press and media, all of whom continued to show me such encouraging and wonderful support, I would like to say "thank you" it would have been so much harder without you."
Martin Goldman, Chief Crown Prosecutor for Yorkshire and Humberside, said: "The CPS has carefully reviewed evidence relating to claims of non-recent sexual offences dating between 1958 and 1983 made by four men.
"We have decided that there is insufficient evidence to prosecute.
"This decision has been made in accordance with the Code for Crown Prosecutors and our guidance for prosecutors on cases of sexual offences.
"The CPS worked with police during the investigation. This has helped minimise the time needed to reach a decision once we received the complete file of evidence on 10 May.
"The complainants have been informed and provided with a full explanation in writing."