The decision Friday came after police interviewed the manager, reviewed surveillance footage and looked at Lohan's Porsche and found no evidence that an accident had occurred.
Detectives referred the case to the district attorney's office, which cited insufficient evidence to support a charge that Lohan left the scene of an accident without stopping.
Thaer Kamal, manager of the Hookah Lounge in Hollywood, accused Lohan of striking him with her Porsche early on March 14, just two weeks before the actress' supervised probation ended.
Lohan's spokesman Steve Honig declined comment on the decision.
