The Press Complaints Commission has decided that an Observer column, described as a “disgusting” rant by an MP, was not in breach of the Editors’ Code of practice.
The PCC has not issued an adjudication and said only that the piece was not in breach of the Editors' Code.
The body received 800 complaints on the Julie Burchill column, which was taken off the website after it was published in January.
At the time, editor John Mulholland told readers: “On this occasion we got it wrong and in light of the hurt and offence caused I apologise and have made the decision to withdraw the piece.”
Despite the various complaints not being upheld by the PCC an internal Observer inquiry in January found that the article had broken the newspaper’s own code.
Readers’ editor Stephen Pritchard revealed that he had received more than 1,000 emails in addition to nearly 3,000 comments online – “most of them highly critical” – about the article within 24 hours.
Following the publication, more than 100 transgender people held a “peaceful” vigil outside The Guardian and Observer offices.
Burchill’s piece was originally penned in defence of fellow writer, Suzanne Moore, who came under fire on Twitter after suggesting in the New Statesman that women were expected to look like "a Brazilian transsexuals".
Burchill wrote that "screaming mimis" had accused her friend of "white feminist privilege" and forced her to leave the social networking site.
Former Lib Dem equalities minister Lynne Featherstone said the Burchill piece was “absolutely disgusting” and “a bigoted vomit” – and calling for Burchill and Mulholland to be sacked.
After being taken down from guardian.co.uk, Telegraph blogger Toby Young republished the article.