Police Minster Michael Woodhouse told Parliament the decision not to lay formal charges was made after seeking legal advice. A young woman involved in the incident was satisfied with the outcome, he said.
Walsh and police are now refusing to comment further on the case.
Walsh said the recent meeting to discuss the case had resulted in a Memorandum of Understanding to provide clear guidelines for principals and police when managing offensive online behaviour by pupils.
Deputy commissioner Mike Clement said principals and police shared the same concerns at the rise in offensive online behaviour linked to a massive increase in social media use by young people.
He said the police took all allegations of sexual misconduct and assault seriously and would investigate them appropriately.
Cases involving alleged sexual misconduct, particularly those involving young people and online activity, were often complex and required careful consideration of legal, privacy and public interest concerns.
He said police had to take into account a range of factors, including the evidential test as required under the Solicitor-General's guidelines, legal opinions and the wishes of the victim and their family.