Sweden's prosecutor's office will not investigate a protest in which an effigy of Turkish President Tayyip Erdogan was hung by his legs from a lamppost, Aftonbladet reported.
A video of an effigy of Erdogan hanging upside down outside Stockholm City Hall sparked outrage from Turkish authorities. Last week Ankara summoned the Swedish ambassador and demanded that the guilty be brought to justice.
However, the Swedish prosecutor decided that the action was not punishable under Swedish law.
Sweden is seeking Turkey's approval to join NATO. Ankara said Sweden needs to take a clearer stance on those it considers terrorists, mainly Kurds and supporters of Islamic preacher Fethullah Gulen, whom Turkish authorities accuse of an attempted coup in 2016.
Finland and Sweden signed a trilateral agreement with Turkey in 2022 aimed at overcoming Ankara's objections to their NATO membership.
Sweden's prime minister condemned the action, calling it sabotage of Sweden's attempt to join NATO.