The decision, which followed an inquest jury's verdict that the 51 people who died on the Marchioness pleasure boat were unlawfully killed, provoked anger and disappointment among relatives of the victims.
But the CPS said it reached the decision after considering the evidence put before the inquest and seeking advice from top barristers and an independent marine expert. In an official statement, it said: "Senior CPS lawyers have decided that there is insufficient evidence to institute any further criminal proceedings in connection with the sinking of the Marchioness.
"The CPS conducted a thorough review of all the evidence including that presented to an inquest jury which brought back an unlawful killing verdict in April 1995.
"The decision was made by the CPS following written advice from senior Treasury counsel and an independent marine expert. Representatives of the families of the victims and the survivors have been informed of the decision."
Louise Christian, a solicitor acting for the victims' families, said: "This decision is immensely disappointing to the families but is no surprise after nearly seven years of bungling by the CPS. The families did not learn all the facts about what happened until the inquest last year, because until then there had been no public inquiry and no inquest. The CPS, however, had access to all the evidence at the outset and the verdict of the inquest jury means that a successful prosecution for manslaughter could have been brought."
Ms Christian called for public inquiries into all disasters to be a statutory right.
The Marchioness was packed with 131 revellers when it was struck by the dredger Bowbelle near Southwark Bridge on the Thames on 20 August 1989.
The skipper of the Bowbelle, Douglas Henderson, was twice tried for endangering life, but in each case the jury failed to reach a verdict.
The Labour Party and the Liberal Democrats criticised the CPS decision, with members of both parties renewing calls for a public inquiry into the tragedy. Graham Allen, shadow Minister for Transport, said: "The families of those lost in the Marchioness accident are right to feel let down. The CPS, having delayed the decision for a year and a half, have now rejected the unanimous verdict of the jury of unlawful killing."
He added: "Until there has been a public inquiry this case will remain unresolved."
Simon Hughes, Liberal Democrat MP for Southwark and Bermondsey, repeated the call for an inquiry and said the announcement, made two days into Parliament's summer recess, "smacks of intentionally conspiratorial timing".
He said: "As a nation we deal with disasters like the Marchioness in a thoroughly unprofessional and unacceptable way. The lottery of inquest, prosecution and public inquiry must be ended as soon as possible."Reuse content