The Stamford State's Attorney David Cohen made the announcement Friday, saying the case did not rise to the level of criminal negligence.
Fire tore through the Victorian mansion early Christmas morning, killing 7 year-old twin girls Grace and Sarah Badger, their 9-year-old sister Lily Badger and their grandparents Lomer and Pauline Johnson.
The blaze was started by embers in a bag of discarded fireplace ashes. The girls' mother Madonna Badger and her friend Michael Borcina managed to escape.
The girls' parents have filed notices that they plan to sue Stamford, accusing officials of intentionally destroying evidence when they demolished the home a day after the fire.
Cohen admitted that the investigation "was hampered to some degree" by city officials when the house was demolished. He said in the future, the police department and prosecutor should be consulted before any demolition is carried out.
The Associated Press contributed to this report.