Ann Birmingham Scheel of the U.S. attorney's office issued a statement Friday saying the four-year investigation into allegations against Arpaio, former county attorney Andrew Thomas and their top deputies had been wrapped up, The Arizona Republic reported.
In a letter to current Maricopa County Attorney Bill Montgomery, Scheel said the investigation into allegations of civil-rights violations, misuse of public money and perjury produced insufficient evidence to warrant prosecution, the newspaper said.
Arpaio, a Republican running for a sixth term, said he "never had any doubt" the investigation would clear his office.
"If I did something wrong, there would be indictments floating all over the place," Arpaio said.
His Democratic challenger, Paul Penzone, said the outcome doesn't vindicate Arpaio.
"This is not something that law enforcement should celebrate, it's something of great concern," Penzone said. "There are obvious failings in the sheriff's office. The fact that they did not rise to a level of criminal indictment does not lessen that they are failings."
Thomas, who has been disbarred for ethical misconduct, said in a statement the Justice Department "acknowledged the obvious."
"The real losers in the political witch hunt that just ended are the people of Arizona," he said. "Prosecutors no longer attempt to fight corruption or illegal immigration in Arizona because they fear being targeted and disbarred."
Scheel said her investigation has no impact on a racial-profiling civil case brought against the sheriff's office in May by the Justice Department's Civil Rights Division.
Arpaio, who also faces a racial profiling civil suit brought by civil rights groups, said the federal officials "did a good job performing their duties, just like I perform my duties," the Los Angeles Times reported.