The Duke of Edinburgh will face no further action over the collision on the A149 near Sandringham last month, the Crown Prosecution Service said.
Prince Philip, 97, voluntarily surrendered his driving licence following the crash which saw one woman break her wrist.
Philip had apologised for his part in the accident on the Sandringham estate in Norfolk when his Land Rover Freelander collided with another car, leaving two women needing hospital treatment.
Buckingham Palace said the Duke of Edinburgh “respects the decision” taken by the CPS.
The crash occurred on 17 January when he pulled out into a busy A road and collided with a Kia, carrying a nine-month-old boy, his mother, and another passenger.
Some 48 hours after the crash he was pictured driving without a seatbelt, prompting fierce criticism.
At the time of the collision, celebrity lawyer Nick Freeman said Philip could face prosecution for driving without due care and attention, which carries an unlimited fine.
But the lawyer said the duke could avoid prosecution by surrendering his licence because it would decrease the chances of a case being in the public interest.
On Thursday Chris Long, chief prosecutor for CPS East of England, said it had been decided it was not in the public interest to prosecute.
“The CPS has carefully reviewed material submitted by the police in relation to a traffic collision on the A149 on 17 January this year,” he said.
“We took into account all of the circumstances in this case, including the level of culpability, the age of the driver and the surrender of the driving licence.
“We have decided that it would not be in the public interest to prosecute.
“All those involved in the collision have been informed and provided with a full explanation in writing.”
The decision was made after considering all the evidence submitted by the police and in accordance with the two-stage test in the Code for Crown Prosecutors.