Sayeeda Warsi faced a stream of damaging headlines last month, in which she was accused of making improper expense claims and of not declaring a business interest with a relative who had travelled with her on official business to Pakistan.
Cameron, already under pressure for refusing to subject another minister to an investigation, would have faced calls to sack her if the report had come out strongly against her.
But the report by his adviser on the ministerial code, Alex Allan, said Warsi's rules breach over the Pakistan trip was "minor". He cleared her of using her office for personal financial gain.
Cameron said he was satisfied with the conclusion, and that Warsi was a "great asset in building our reputation overseas".
The case came at a bad time for the Conservative-led coalition government, which has seen its popularity slump since a poorly received annual budget in March and the economy's return to recession in April.
The main opposition Labour Party has maintained calls for Culture Secretary Jeremy Hunt to be referred to the ministerial code watchdog over allegations he was too close to Rupert Murdoch's media company News Corp.
Hunt had been in charge of scrutinising a bid by News Corp for pay TV operator BSkyB.
Labour lawmaker Michael Dugher said "the real question posed by this (Warsi) affair is why David Cameron is still refusing to refer the much more serious" case, alleging Hunt misled parliament over the bid.
Warsi, Britain's first Muslim woman to hold a cabinet post, had travelled to Pakistan on official business with her husband's second cousin Abid Hussain, a fact Warsi said was known to British officials.
However, in a letter to Cameron that was made public, she said she had not realised the need to disclose her and Hussain's common business interest in a small food company.
No other politician has been referred to the adviser since Cameron came to power in 2010.
There are no set sanctions for serious ministerial code breaches, and it would have been up to Cameron to decide what course of action should have been taken.
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