Solicitor General David Collins QC announced this afternoon that cases against 12 of the Urewera 16 did not warrant prosecution under the Terror Suppression Act, but could go ahead under the Arms Act.
But, while commending the police investigation, he described the terror legislation as "complex and incoherent", and said it should be reviewed by the Law Commission. He said it was almost impossible to apply to domestic terrorists.
Mr Collins told a media conference he had read hundreds of pages of communications and viewed photographs and video footage.
"Regrettably not all the evidence I have been able to see will be made public," Mr Collins said.
"The key reason I am not prepared to authorise prosecutions under the act is there is insufficient evidence to establish to the very high standard required that a group was preparing a terrorist act," Mr Collins said.
He said his decision was not a criticism of the police who had no doubt "put an end to disturbing activities".
But he said a lot of the evidence will be made public during the up-coming trials.
"Police were following proper practice under the Terrorism Suppression Act," Mr Collins said.
Tuhoe spokesman Tamati Kruger says it's a "triumph for truth", after the Solicitor General's decision not to prosecute the Urewera 12 under the Terrorism Suppression Act.
Police took 12 of the 16 cases to the Solicitor General last month who assessed the police's evidence.
Peter Williams QC is representing residents of Ruatoki who have complained about the way armed police searched their homes last month.
Mr Williams said the Solicitor General's decision was a wise one and he was personally pleased with it.
"In a small way they have contributed to the hysteria possibly being emitted by certain aspects of the prosecution but on the other hand it's not the issue the people of Ruatoki are looking at, they're looking at whether or not there was a form of terrorism by the police themselves," Mr Williams said.