The director of the agency described her actions as "extremely careless"
FBI director James Comey said the investigation had found "extremely careless" behaviour by Mrs Clinton and her staff.
It is even possible that "hostile" forces may have gained access to Mrs Clinton's personal email account, he said.
But, outlining the agency's findings at a news conference, Mr Comey concluded that "no charges are appropriate".
"Although there is evidence of potential violations of the statutes regarding the handling of classified information, our judgement is that no reasonable prosecutor would bring such a case," he said.
Mrs Clinton's rival Donald Trump, who had called for criminal charges, reacted by tweeting that the "system is rigged".
The FBI announcement came three days after agents interviewed Mrs Clinton about the possible mishandling of classified information.
Attorney General Loretta Lynch said last week she would accept the recommendations of the FBI director and of career prosecutors.
This means Mr Comey's decision almost certainly brings the legal part of the issue to a close and removes the threat of criminal charges.
However, it is unlikely to wipe away many voters' concerns about Mrs Clinton's trustworthiness.
And it probably will not stop Mr Trump from continuing to make the private email server a campaign issue.
Mrs Clinton's personal email server, which she relied on exclusively for government and personal business, has dogged her campaign.
She has repeatedly said that no email she sent or received was marked classified.
But the Justice Department began investigating last summer following a referral from the intelligence community.
The scrutiny was compounded by a blistering audit in May from the State Department's internal watchdog.
It said that Mrs Clinton and her team ignored clear warnings from department officials that her email setup violated federal standards.
It said the email set-up could leave sensitive material vulnerable to hackers.
Meanwhile, Wikileaks took to Twitter on Independence Day to announce that they would be releasing over 1,200 private emails from Clinton's personal server.
This data was released by the State Department in February through a Freedom of Information request, and WikiLeaks collected up any and all emails tied to the Iraq War and put them all in one place.