FIFA's disciplinary committee concluded there was "no legal foundation" for them to deal with the case.
The decision means Henry will not face a ban for any matches of this summer's World Cup finals.
FIFA said in a statement: "The disciplinary committee reached the conclusion that there was no legal foundation for the committee to consider the case because handling the ball cannot be regarded as a serious infringement as stipulated in article 77a) of the FIFA disciplinary code.
"There is no other legal text that would allow the committee to impose sanctions for any incidents missed by match officials."
Henry's handball in the run-up to William Gallas' decisive goal in the World Cup play-off qualifier ended the Republic's dreams of qualifying for the finals in South Africa.
The Football Association of Ireland were infuriated by the goal and demanded a replay, then even suggested they should be allowed to go to the World Cup as a 33rd team.
FIFA dismissed their demands but did agree to have another look at the possibility of using video evidence in the future, and instructed the disciplinary committee to investigate possible action against the 32-year-old former Arsenal hero.
Henry's defence today argued successfully that FIFA's disciplinary code does not give the committee the ability to punish such incidents.
Under current rules, only the illegal use of a hand to prevent a goal being scored is covered in relation to possible sanctions.
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