Football Federation Australia on Thursday dismissed allegations by former Iraqi international Ali Abbas that he was racially abused during an A-League match.
The FFA said there was a lack of evidence to discipline Western Sydney's Brendon Santalab, who Sydney FC's Abbas alleged had insulted his race, culture and religion during a match on March 8.
Abbas may have misheard Santalab, the FFA's disciplinary committee said. It reached the decision following two lengthy hearings involving both players.
"Brendon Santalab accepted that Ali Abbas genuinely believed that the offensive word had been used," it said in a statement, without specifying the word.
But given the "undisputed high noise levels and in the absence of other eyewitness or corroborative evidence, it was possible that Ali Abbas may have misheard what was said by Brendon Santalab", the committee said.
"Therefore the committee was not satisfied to the necessary standard of proof that the offending words were used by Brendon Santalab and dismissed the matter."
Abbas had protested furiously to the referee in the final minutes of the volatile Sydney derby and later said his outburst was triggered by racial slurs.
The incensed player had to be physically restrained by his team-mates several times as he raged at Wanderers players.
Sydney FC said it was "extremely disappointed" with the decision.
"Ali stands by the comments he made after the game and Sydney FC fully support him in this," club chief executive Tony Pignata said in a statement.
"We would like to reiterate that we believe racial vilification has no place in football or in society.
"The last few weeks have been very testing times for Ali through which he has shown great strength of character and continued to perform to his best."
Abbas, 27, was a member of the victorious Iraqi national team that won the Asian Cup in 2007.
He fled war-torn Iraq after playing an under-23s international against Australia north of Sydney in 2007, and was later granted asylum to stay in the country. He became an Australian citizen in 2012.