The case will remain on hold unless new evidence emerges, the attorney-general's office said.
The statement said detectives found no reason to charge any of the three people named as suspects: Madeleine's parents Kate and Gerry and local man Robert Murat. All strenuously denied involvement in the disappearance and won libel awards from newspapers that suggested links.
CBS News correspondent Sheila MacVicar reports the McCanns may still face charges on other related matters.
Madeleine went missing in May 2007, a few days before her fourth birthday, during a family vacation in Portugal's southern Algarve region.
"In an order issued today ... the investigation into the disappearance of the minor Madeleine McCann has been halted because no evidence was discovered of any crime committed by the suspects," Attorney-General Fernando Pinto Monteiro's office said.
It said the investigation could be reopened "if new evidence emerges from any serious, pertinent and authoritative" source.
Madeleine's parents said she vanished from their hotel room while they were eating dinner with friends at a resort's poolside restaurant in the sleepy vacation town of Praia da Luz, about 120 miles south of Lisbon.
Police previously said DNA evidence, though inconclusive, led them to doubt the McCann's version of events.
The McCanns returned home to central England with Madeleine's younger twin sister and brother in September, a few days after they were named as suspects. They hired a legal team and media advisers and waged an international campaign to find their daughter.
Lawyers for the McCanns, who have hired private investigators to find their daughter, may now ask a judge to grant them access to the police file. Officials have said it runs to 10 volumes. Access to the case file is permitted, at a judge's discretion, to "interested parties."
The McCanns lent their efforts unprecedented reach through the Internet and the media greatly amplified the story with a string of reported leaks and speculation. Portugal's secrecy laws covering ongoing investigations placed official information off-limits.
In March, the McCanns won front-page apologies and a large libel payout from several newspapers that had made claims about their role in their daughter's disappearance.
Murat last week won an apology and $1.2 million in libel damages from nearly a dozen British newspapers that claimed he was involved. Afterwards Murat said, "I've been through hell and back without doing anything wrong."
The case brought reported sightings of the blonde little girl from around the world.
Pope Benedict XVI blessed the McCanns, who are Catholics, along with a photo of their daughter during his weekly general audience at the Vatican a few weeks after her disappearance.
Celebrities, including "Harry Potter" author J.K. Rowling and soccer star David Beckham, made public appeals that helped raise money for a Find Madeleine fund.
The McCanns also traveled to Brussels, Morocco and Spain in their effort to raise public awareness of their daughter's disappearance. They have also campaigned for the introduction of a Europe-wide child abduction alert similar to the Amber Alert system in the United States.