A spokeswoman released a statement saying "it would not be prudent" to take their complaint any further, especially in light of the Prince's deployment in Afghanistan.
She said: "Having considered the matter now for a number of weeks, we have decided not to pursue a complaint."
She added: "We remain of the opinion that a hotel room is a private space where its occupants would have a reasonable expectation of privacy."
The photos, which were taken in Prince Harry's Las Vegas hotel room, were said to be of him and his friends playing a game of "strip billiards". They were first published on US gossip site TMZ.
Only one British publication, the Sun, decided to publish the photos, despite the royal family's lawyers insisting it would be an invasion of the Prince's privacy.
Meanwhile, the Duke and Duchess of Cambridge are currently taking legal action over the publication of the photos of a topless Kate on holiday in France.
The couple have managed to secure an injunction which prevents the images being published in France. The photos have since been published in the Irish Daily Star, Italian magazine Chi and Dutch magazine Se og Hoer.