Kurdish groups and left-leaning Swiss political parties organized the protest in Geneva in March, where a banner showing a gun pointing at Erdogan was brandished, alongside the words: "Kill Erdogan".
The rally took place at the height of Ankara's ultimately successful campaign to get citizens to vote 'Yes' in a April 16th referendum to expand the Turkish president's powers.
Turkey was furious and summoned the Swiss ambassador over the demonstration. Swiss and Turkish officials launched separate investigations.
However municipal authorities in Bern determined that the organizers had not breached the rules governing demonstrations, the NZZ daily reported on Monday, quoting local police chief Marc Heeb.
It was unreasonable to expect organizers of the demonstration, which drew thousands of people, to take action against the protesters waving the banner, he said.
But while the organizers will not face charges, Bern prosecutors are pushing ahead with a criminal probe against the individual protesters who carried the banner and who are suspected of incitement to violence, NZZ reported.