Mr Netanyahu escaped prosecution for allowing suspected criminals to dictate the choice of Israel's chief prosecutor, as alleged by the police. But he may face a battle for political survival as members of his coalition decide if they can remain in the government in the wake of the scandal.
The attorney-general, Alyakim Rubinstein, said there was insufficient evidence to bring to trial Mr Netanyahu and Tzahi Hanegbi, the justice minister. No decision had been reached on the indictment of Avigdor Lieberman, director-general of the prime minister's office. Aryeh Deri, a former interior minister and the leader of Shas, a religious party, which is part of Mr Netanyahu's coalition, will be charged with "fraud, extortion and obstruction of justice".
Mr Netanyahu's troubles will not go away. The decision not to indict him will be appealed to Israel's Supreme Court, which in the past has ordered the prosecution of senior politicians and businessmen to go ahead. Mr Rubinstein said there was grounds for "bewilderment" over Mr Netanyahu's behaviour, but his criticism was not as scathing as had been expected.
He repeatedly said there were grounds for "suspicion" over the prime minister's behaviour but insufficient grounds to bring him to trial. A longer report by Mr Rubinstein and Edna Arbel, the state attorney, was issued yesterday evening.
The scandal has revolved around allegations that Mr Netanyahu allowed Mr Deri, on trial accused of bribery and fraud, to choose a little known but politically sympathetic Jerusalem lawyer called Roni Bar-On to be Israel's attorney general. Mr Rubinstein confirmed that Mr Deri has tried to pressure the prime minister, but said he lacked conclusive evidence that the pressure had been effective.
Mr Netanyahu's future now depends on his cabinet ministers and coalition partners. Five members of the cabinet are believed to be considering resignation. Two of them lead parties without which Mr Netanyahu would have no Knesset majority.
But the biggest danger facing Mr Netanyahu is that Natan Sharansky, leader of the Russian immigrants' party, and Avigdor Kahalani, who heads the Third Way, a Labour party splinter group, will abandon him. Both stood as clean government parties in last year's elections and are expected to do well again at the polls.Dan Meridor, the finance minister, is also threatening to resign.
Before the report was issued Mr Netanyahu's office modified its previous attacks on the police as biased and began to admit that "errors of judgement" might have been made.
One strategy for Mr Netanyahu would be to follow up his admission of error by asking Mr Lieberman and Mr Hanegbi to resign. If he is to keep Mr Sharansky and Mr Kahalani in his government then he will have to give them more power. Even if his coalition does hold, the prime minister will be seriously weakened and will have to modify his ambition to install his own supporters in senior positions in the army, security forces, police and civil service.Reuse content