The U.S. has not dropped its interest in Assange, and London Metropolitan Police were quick to say they will continue to enforce an outstanding arrest warrant for him.
Assange's defense lawyer, Per Samuelson, has called the prosecution's decision a "total victory".
Although Sweden has dropped its investigation of rape allegations against Assange, British police say they still intend to arrest him on a charge of jumping bail if he leaves the Ecuadorean Embassy. He said Assange had convinced Swedish prosecutors during a November meeting previous year that he was not guilty of any sex offences.
At a news conference in Quito, Ecuador, the country's foreign minister, Guillaume Long, lambasted Swedish authorities for delays in resolving the probe, according to The Associated Press.
But the United Kingdom authorities indicated Friday that Assange still faces arrest there were he to leave the embassy. The US Justice Department still mulling charges against Assange, and Attorney General Jeff Sessions has said that prosecution of organizations like Wikileaks is a "priority".
He said that lawyers for the Australian, who are based around the world, were discussing the implications of the decision.
March 17 - Federal prosecutors in Alexandria, Virginia, have expanded a long-running grand jury investigation into WikiLeaks.
Assange is wanted by British police for extradition to Sweden.
According to reports, in a brief statement by the prosecutor, in this case, said: "Director of Public Prosecution, Marianne Ny, has today made a decision to discontinue the investigation regarding suspected rape by Julian Assange".
"The decision to discontinue the preliminary investigation is not because we've been able to make a full assessment of the evidence in this case, but because we didn't see any possibilities to advance the investigation forward". However, the court backs Assange's extradition to Sweden in May 2012 over alleged sex crimes.
Sweden's top prosecutor, Marianne Ny, says she has withdrawn a European arrest warrant for WikiLeaks founder Julian Assange after concluding that it won't be possible to bring him to Sweden. "So we don't make any statements on the issue of guilt", she said via a translator.
Scotland Yard said it was obliged to execute a warrant issued by Westminster Magistrates' Court for the arrest of Mr Assange following his failure to surrender to the court in June 2012 should he leave the embassy.
Assange has said the charges were orchestrated to ultimately extradite him to the United States where he is wanted for questioning about the release of thousands of classified cables in 2010.
WikiLeaks tweeted: "UK refuses to confirm or deny whether it has already received a USA extradition warrant for Julian Assange. Focus now moves to United Kingdom", the group tweeted.
However, it noted that now that the Swedish authorities had dropped their investigation, Assange was "wanted for a much less serious offence" than before and said the force would "provide a level of resourcing which is proportionate to that offence".
"That is not something I can forgive, or forget", he said, claiming he had suffered a "terrible injustice" while living under house arrest or hidden away inside the embassy without ever being charged with a crime.
"Director of Public Prosecution, Marianne Ny, has today chose to discontinue the investigation regarding suspected rape (lesser degree) by Julian Assange", Swedish prosecutors said in a statement.
However, if Assange were to return to Sweden before the statute of limitations for the suspected offenses expires in August 2020, the investigation could be reopened, she said.
Police kept up round-the-clock guard outside the embassy until previous year, when the operation was scaled back.