The Paris public prosecutor's office said the evidence suggested sexual assault, but said it was impossible to pursue a case on these grounds because the incident took place more than three years ago.
In a statement, the prosecutor's office said of a preliminary police inquiry: "What came to light is that, while there is not enough evidence to pursue on a count of attempted rape, there are elements that can be qualified as sexual assault."
Strauss Kahn was accused of attempting to rape Banon, a woman 30 years his junior, in 2003 in a Paris flat where she went to interview him.
Banon brought the charges in July after Strauss-Kahn, a Socialist who was once runaway favourite to become next French president, was arrested in New York on criminal charges, now dropped, of attempting to rape a hotel maid.
While it would still have been possible to pursue Banon’s allegations against Strauss-Kahn on a count of attempted rape, sex assault charges fall outside of the judicial time limits.
Banon's lawyer, David Koubbi, said the outcome was disappointing but that it proved her complaint was not a figment of her imagination.