The commission unanimously agreed that the officer, identified as Frank Hernandez, acted within department policy.
Manuel Jaminez Xum was shot and killed on Sept. 5 at 6th and Union, sparking three days of demonstrations and 20 arrests.
Police say the 37-year-old was drunk while riding his bike and threatening people. Hernandez claimed Jaminez lunged at him, forcing him to shoot.
LAPD Police Chief Charlie Beck and Mayor Antonio Villaraigosa have defended the officer. Beck has said that a knife was recovered at the scene.
"The vast majority of the witnesses described the knife, described the actions. There's a lot of angst about this in the community and a lot of misinformation," Beck said.
But advocates say it could have been handled differently.
"Many people in the community saw that Jaminez was no serious threat to anyone. He was too drunk to walk and could barely stand and there are people who even said he didn't have a weapon," said Carlos Montes of the Southern California Immigrant Coalition.
City News Service contributed to this report.