Swedish police launched a probe after a woman described how she became the unwilling witness of a sexual act between the driver and another passenger.
The woman claimed she was on a local city bus in Lund last Friday night when the driver suddenly turned off the lights and begun to touch another female passenger in the belief that the pair were alone on the bus.
She was able to leave the vehicle at the next stop after being discovered when she hit the stop button. She later reported the incident to the police as sexual harassment.
But officers announced late on Tuesday that the investigation had been dropped, saying that it could not be proven the man had known the woman was onboard the bus at the time.
"Not all inappropriate behaviour is punishable," police inspector Anne Lindvall told Swedish tabloid Aftonbladet.
It has still not been proven whether or not the incident actually took place, and the driver denies all accusations.
Regional public transport firm Skånetrafiken had announced earlier on Tuesday that the man would be transferred to another position within Nettbuss, which operates city bus traffic in Lund, pending the police investigation.
“From the perspective of Skånetrafiken we think this is the right decision. Journeys by public transport are by and large about feeling safe as a traveller. The police investigation will reveal what actually happened,” said traffic director Maria Holmgren at the time.
It had not been confirmed by Wednesday morning whether or not the man would be returning to his position as a bus driver.