The decision rounds off a tumultuous few months for the 24-year-old singer and his brother Noel, who together form the core of the all-conquering band, Oasis.
They have rarely been out of the headlines in the past year and publicity reached a high when the band's disastrous US tour collapsed amid rumours of a split.
Ironically, the decision by police to caution Gallagher and spare him from prosecution will free him to join the other band members in their latest attempt to conquer America.
Gallagher was arrested and bailed in November after a night of carousing to celebrate the band's success at the Q magazine awards.
Following the caution at Marylebone police station in central London yesterday, his solicitor Anthony Burton said: "The police have considered it appropriate to caution Mr Liam Gallagher for possession of a controlled drug when he surrendered to bail
Gallagher refused to comment last night but has admitted in interviews that he spent up to pounds 300 a day on the drug.
Not surprisingly, MPs and the father of the drug victim Leah Betts were furious at his escape from the clutches of the law.
Paul Betts, 50, said if he had the power he would not hesitate to send Gallagher to prison for a similar offence. Mr Betts believed Gallagher refused to apologise because it would ruin the band's "bad boy" reputation.
He said: "Oasis are a fantastic band, my daughter loved them. But young people look up to them as role models. If they see people like him get away with it they think `what's stopping me doing the same?'"
Sir Gerard Vaughan, Conservative MP for Reading East, and a former health minister, accused the police of distorting the law.
He said: "What Gallagher has done is illegal and he should be prosecuted for it. If the court decided merely to caution him that would be regrettable, but at least it would not be beyond the powers of the court."
However, police rejected claims that they had been lenient. A statement from Scotland Yard said: "Cautioning is an effective method of dealing with first-time offenders, with reoffending rates within two years being very low."
Oasis, whose first two albums have sold 20 million copies, are the biggest selling British band since their heroes the Beatles.