Mark Gilmore was suspended in June 2014 by the county's police and crime commissioner (PCC) in connection with an investigation into the awarding of vehicle contracts in Northern Ireland.
PCC Mark Burns-Williamson said prosecutors had concluded there was no criminal case for the chief constable to answer.
However, Mr Gilmore will not return to his post immediately.
In a statement, Mr Burns-Williamson said: "There remains however a legal requirement for me to consider conduct matters in relation to the police standards of professional behaviour and an independent investigation will be carried out by Lancashire Police.
"While this conduct investigation takes place Mark Gilmore has agreed to work on a transition project for the National Police Chiefs' Council (NPCC) and to delegate day-to-day operational control of West Yorkshire Police to his deputy Dee Collins who has, in his absence, acted as the temporary chief constable."
The Police Service of Northern Ireland (PSNI) had arrested a total of seven men on suspicion of offences including bribery, misconduct in public office and procuring misconduct in public office.
Mr Gilmore, originally from Belfast, joined the Royal Ulster Constabulary, the predecessor of the PSNI, in 1983.
He was appointed Chief Constable of West Yorkshire in April 2013.

Sally Shalloe, 51, of Attenborough, Nottinghamshire, died when her bicycle was hit by David Staley's motorbike in Middleton Boulevard in April last year.
At Nottingham Crown Court, Staley, 32, admitted causing Ms Shalloe's death by dangerous driving.
Staley, of Arnold, Nottingham, is due to be sentenced on 13 May.
Ms Shalloe worked as a research fellow at the University of Nottingham, and husband Jim Hill said his wife previously produced studies on road safety.
"She was cycling to work that morning," said Mr Hill, who had been married to Ms Shalloe for 16 years.
"I had a policewoman walk into my work office and tell me she'd been killed. It was like being split in two with an axe.
"It's turned my life upside down completely. I've got a constant feeling of loss."
Staley was disqualified from the roads before being bailed ahead of his sentencing.

Sturrock has nearly an entire team of injured players with 10 of his first-team squad doubtful for Saturday's League Two game against Wimbledon.
To add to his woes forward Shaun Jeffers is also suspended following last weekend's red card.
"We've just got to battle through these next two games," said Sturrock.
Winger Jack Compton has also been ruled out for four weeks leaving Sturrock little choice but to ask some of his squad to play despite carrying knocks.
"I won't be able to fill it so I'll bring in one of the youth players to sit on the bench in a position we don't have many players for," Sturrock told BBC Radio Bristol.
"Jordan Gibbons is playing with an injury but he'll have to play again. It's not ideal but that is the situation we are in.
"It's quite scary when you look at the age of certain players playing every week. They deserve the experienced players to come back as quickly as possible.
"They are getting match practice and learning their trade but they are making mistakes and really we need to get a more solid team on the pitch."

Police and firefighters were called to the fire, in Elgin Road at its junction with Inchbroom Road, at about 16:10 on Wednesday.
The body of the elderly man was found inside. His name has yet to be released. No-one else was injured.
Police said a joint fire investigation would take place but their initial inquiries suggested there were no suspicious circumstances.
West Yorkshire's chief constable has had his suspension lifted.
[NEXT_CONCEPT]
A motorcyclist has pleaded guilty to causing the death of a former road safety worker who was killed in a crash on a busy Nottingham road.
[NEXT_CONCEPT]
Yeovil Town manager Paul Sturrock says he will struggle to fill the substitute bench this weekend as an injury crisis threatens to derail their season.
[NEXT_CONCEPT]
An 88-year-old man has died following a fire at a house in Lossiemouth.