The family of Jean Charles de Menezes accused the Metropolitan Police of "getting away with murder" yesterday after 11 officers escaped punishment over his death.
The officers who mistook the Brazilian for a suicide bomber and shot him will not be disciplined, the Independent Police Complaints Commission (IPCC) said.
But the threat of a disciplinary tribunal still hangs over four senior officers, including Commander Cressida Dick, who authorised the shoot-to-kill policy.
The IPCC said one surveillance officer will be given "management advice" over action he took after the shooting at Stockwell Tube station.
Patricia da Silva Armani, Mr de Menezes' cousin, said her family were bitterly disappointed.
She said: "It is disgraceful the IPCC can make such a decision - they are letting the police get away with murder."
Mr de Menezes, an electrician, was shot seven times in the head after being mistaken for a suicide bomber at Stockwell tube station on July 22, 2005.
His death came in the aftermath of the 7/7 London bombings in which 52 people were killed and hundreds injured in the worst terrorist atrocity in British history.
The Metropolitan Police faces prosecution under health and safety laws for organisational failings connected to the shooting. The IPCC said no decision about the fate of the four senior officers will be made until after the trial, scheduled for October.
But the Justice4Jean Campaign, set up by his family and friends, said yesterday's decision could prejudice the health and safety trial.
A spokesman said: "Today's decision effectively says police officers can act above the law, free to take human life without facing a full legal investigation like anyone else."
The de Menezes family's legal team said it is "highly unusual" for the disciplinary decision to be made prior to the conclusion of criminal proceedings.
A spokeswoman said the family believe criminal charges for manslaughter through gross negligence can still be brought against the four senior officers.
Nick Hardwick, IPCC chairman, said the grief of Mr de Menezes' family was "entirely understandable", but there is no realistic prospect of the 11 officers being disciplined.
The results of a second IPCC investigation which looked into complaints about comments made by Commissioner Sir Ian Blair and colleagues following the shooting, will be made public later this year.