Instead, it ordered an independent expert to start work immediately on investigating every aspect of children in care.
The Welsh Office minister Rod Richards said he accepted the conclusions of a confidential report from the lawyer Nicola Davies QC that there was no case for a public inquiry.
Ms Davies was appointed earlier this year by the former Welsh Secretary John Redwood to examine all the evidence after a long-running police probe into the running of council homes in Clwyd and Gwynedd.
Seven men were variously convicted of sex abuse and assaults in separate prosecutions brought during four years of extensive inquiries involving up to nearly 50 children's homes.
In her report, Ms Davies recommended a thorough examination of Clwyd and Gwynedd Social Services departments, and of private children's homes in those areas, to ensure they were working effectively. No case for a public inquiry had been established.
In her view, an inquiry into events before 1989, when most of the allegations arose, would primarily be of "historical interest".
She found that North Wales police carried out a "thorough and extensive" investigation into allegations of abuse.
Ms Davies said that since then there had been a radical revision of procedures. Documents she examined did not demonstrate that problems in the pre-1989 period had continued.
Accepting all her recommendations, Mr Richards said he had appointed Miss Adrianne Jones, Birmingham's former director of social services to head the examination. She is also a recent head of the Department of Health's Child Residential Care Support Force.Reuse content