Jani Chathurangani de Silva, a double medallist at the August 2006 Games, tested positive for the anabolic steroid nandrolone, and was summoned before an official inquiry committee.
Wijeyadasa Rajapakshe, who headed the committee, said de Silva was freed of charges due to "procedural deficiencies".
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Rajapakshe said the inquiry panel had no problems with the findings of the medical committee, but it was not happy with the procedure adopted in conducting the investigation.
"We gave the athlete the benefit of the doubt created by procedural deficiencies," said Rajapakshe, but refused to say what the deficiences were.
De Silva faced the risk of losing both medals -- the 4x100 metres relay gold and the 100 metres silver -- after the medical committee said she had tested positive.
She repeatedly denied the accusation, insisting that she had not taken any banned drugs.