Gordon Brown was rebuked by the Westminster sleaze watchdog today for subletting taxpayer-funded office space to Labour party colleagues.
The Prime Minister "inadvertently" broke rules by allowing premises in his Kirkcaldy and Cowdenbeath constituency to be used.
No punishment will be sought because Mr Brown has apologised and neither he nor the party benefited financially, the Standards and Privileges Committee said.
The committee said in its report: "We conclude that Mr Brown should not have sub-let part of his accommodation paid for from Parliamentary allowances.
"However, neither Mr Brown nor the Labour Party derived any financial benefit from this arrangement and there was no intention to deceive.
"We accept that Mr Brown's breach of the rules of the House was inadvertent and that he took steps to rectify it as soon as it was drawn to his attention.
"Mr Brown has apologised and, in our view, no further action is necessary."
Tory frontbencher Greg Hands, who lodged the complaint against Mr Brown, said he accepted the Premier's apology.
He said: "It does not appear that the Prime Minister has personally profited from the breach, and he did quickly rectify the situation when it was brought to his attention by my complaint and by the media."
The rebuke - though light - will be embarrassing for the premier, who has gone to great lengths to distance himself from sleaze rows in the past.
Between 2005 and 2008, Mr Brown rented a constituency office in Kirkcaldy jointly with MSP Marilyn Livingstone.
Part of the office was sublet to the local Labour Party, which paid Mr Brown and Ms Livingstone around £1,259 a year each.
The breach arose because the then-chancellor was funding the office out of his MP's allowances.
Commons rules have explicitly banned subletting of premises paid for on expenses since 2004 - when former Scottish First Minister Henry McCleish was forced to quit over a similar scandal.
However, the committee found Mr Brown had reduced his allowances claims to account for the extra income.
The Commons authorities were also criticised for giving the MP bad advice when he consulted them about the arrangement. It was stopped in December 2007 when the breach emerged in the media.
A spokesman for Mr Brown said: "We accept the findings of the report which makes clear that the error was inadvertent, there was no intention to deceive, it brought no financial benefit to Mr Brown or the Labour Party, and was quickly rectified once identified."
The Committee concluded: "When entering into the arrangement to share a constituency office with a Member of the Scottish Parliament and to sublet part of it to his local party, Mr Brown should have ensured that the House of Commons authorities were consulted on the rules relating to Members' allowances."
It also highlighted that the premier had acted "dangerously" by assuming that Commons rules were the same as those for the Scottish parliament - which allowed subletting of taxpayer-funded properties.
The MPs said: "It is clearly dangerous for Members of Parliament to assume that the rules of other parliamentary assemblies in the United Kingdom are the same as those of the House of Commons, or vice versa."
The Prime Minister was also criticised for dragging his heels in dealings with standards commissioner John Lyon. The probe took a year to complete after being launched last February.
"We note... that Mr Brown took six weeks to reply to the Commissioner's first letter and that a period of two and a half months elapsed between the Commissioner writing again to Mr Brown and a meeting between them taking place," the committee said.
"It was almost a month before a reply was made to a further letter to Mr Brown, in which the Commissioner requested a response within two weeks.
"While we recognise the extraordinary pressures on the Prime Minister, we believe this should have been handled more promptly."