Police officers, believing the 27-year-old Brazilian electrician to be a suicide bomber, shot him seven times in the head after he boarded a London underground train.
The shooting came amid high tension in the capital over the threat of suicide attacks. Just 15 days earlier, four British Islamists had blown themselves up on underground trains and a bus, killing 52 people and wounding hundreds.
The De Menezes family issued a statement saying it was "gravely disappointed" at the decision.
"The families are given no relief to their agony, grief and anxiety caused by their lack of access to all the evidence …"
The Metropolitan Police have apologized for the killing.
IPCC chairman Nick Hardwick said he had concluded there was "no realistic prospect of disciplinary charges being upheld against any of the firearms or surveillance officers involved."
He said he had reached the decision "on the basis of the evidence I have available to me now or any development that might reasonably be foreseen".
Last July, prosecutors said no police officer would face criminal charges over the shooting. The IPCC said it had not made any decision on disciplinary action against the four commanders and tactical advisors involved in the botched operation.
It was reserving that decision until after a court case due to start in October in which London's Metropolitan Police faces a corporate prosecution under health and safety laws
Mercopress