Attorney General Eric Holder said the policy change is intended to divert law enforcement resources to more pressing concerns.
"It will not be a priority to use federal resources to prosecute patients with serious illnesses or their caregivers who are complying with state laws on medical marijuana," he said.
Holder said the federal government "will not tolerate drug traffickers who hide behind claims of compliance with state law to mask activities that are clearly illegal," McClatchy Newspaper reported.
President Barack Obama said during the 2008 presidential campaign he would not interfere in state policies permitting medical marijuana use but federal agents raided a number of pot dispensaries in Los Angeles within weeks of Obama's inauguration. Raids have also been carried out in San Diego and San Francisco.
California decriminalized marijuana for medical use in 1996 and the legislature set up a program in 2003 in which cards allowing use can be issued to patients and caregivers.
McGregor Scott, a former U.S. attorney for the Eastern District of California, told McClatchy the Bush administration "without exception" prosecuted cases that "involved violations of both state and federal law" and "focused on the most egregious offenders who were making millions of dollars selling marijuana."