Mr Saunders was shot dead after an armed standoff with police outside his Chelsea home during which he fired shots at neighbours with a shotgun.
The case was then taken to the high court after his family claimed his death was unlawful.
They suggested the Independent Police Complaints Commission (IPCC) inquiry into his death was flawed as officers involved in the shootout had conferred before recording their statements.
The high court judge, however, dismissed the case and the CPS has now ruled none of the officers involved in the incident will be prosecuted.
The Metropolitan police released a statement following the CPS decision.
'The officers have now been formally notified that the CPS has decided there are no charges to be brought in this case,' the statement declared.
'No officer would ever wish to have to shoot someone during the course of their duty, but they are prepared to take the most appropriate action where necessary to protect the public and their colleagues.
'Any loss of life, no matter what the circumstances, is a tragedy. Our thoughts remain with the family of Mr Saunders.'
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