Stockholm's county administrative board is tasked with ensuring that foundations created by wills follow their statutes, including the Stockholm-based Nobel Foundation which administers the prestigious Nobel Prizes.
It opened an investigation earlier this year into whether the Norwegian Nobel Committee had correctly carried out the task of selecting the peace laureate under the terms of prize creator Alfred Nobel's 1895 will.
"The county administrative board has decided to dismiss the matter," it said in a statement.
The inquiry was prompted by repeated criticism from Norwegian lawyer Fredrik Heffermehl, author of the 2008 book "The Nobel Peace Prize: What Nobel Really Wanted".
Heffermehl claims the five-member prize committee had gone astray by honouring human rights activists, such as Chinese dissident Liu Xiaobo in 2010, environmentalists such as Al Gore and the Intergovernmental Panel on Climate Change in 2007, and humanitarian workers like Mother Teresa in 1979.
In his will, Nobel stipulated that the peace prize should go to the person or organisation that "shall have done the most or the best work for fraternity between nations, for the abolition or reduction of standing armies and for the holding and promotion of peace congresses".
Heffermehl argued in a statement earlier this month that "the Norwegian prize committee appears to still think it is their task to hand out a prize for 'peace' in general despite the fact that Nobel, according to his will, created a prize for 'champions of peace'."
The Foundation stressed that Nobel had wanted the different prize committees to be independent in their decisions, and that in all categories there was room for interpretation and debate about which areas should be included.
The Stockholm board noted in its ruling that the Nobel Foundation is required to intervene if it finds that a Nobel prize committee has not followed the prescribed provisions in its choice of laureate.
But it noted that there were "no clear guidelines (in the legislation on overseeing foundations) on how such quality control ought to be conducted," and it would therefore not pursue the matter further.