The Commissioner said an investigation had not proved beyond doubt that Chief Superintendent Neil Spencer- Knott had been responsible for making the remark.
Ch Supt Spencer-Knott was told to resign immediately from his pounds 40,000 job at West Hendon, north-west London, after a two-day disciplinary hearing in December.
Mr Condon heard the officer's appeal yesterday, and despite ordering his reinstatement, told the tribunal that if he had found that the officer had made such a comment he would have considered it 'unacceptable'.
Mr Spencer-Knott, 49, was said to have made the remark at a conference in March last year at the police training centre at Hendon. He was alleged to have commented to reporter Camillor Fracassini, of the Hendon Times: 'They are all a bunch of lezzies. There is not a normal one among them.'
Mr Fracassini said at the time of the disciplinary hearing that he had mentioned it to conference officials, one of whom made a formal complaint.
Scotland Yard was discussing where the officer would be posted.