Former Liberal leader Lord Steel said he was 'relieved' that an investigation launched after he gave evidence about child abuse allegations against late Rochdale MP Sir Cyril Smith concluded there were 'no grounds for action'.
Lord Steel had been suspended by the Liberal Democrats while the probe - sparked by evidence he gave to the Independent Inquiry into Child Sexual Abuse (IICSA) - was carried out.
The former Holyrood presiding officer said a conversation with Smith had left him 'assuming' the allegations were correct, but that the party did not investigate them.
An internal party investigation was carried out by the executive of the Scottish Liberal Democrats.
Scottish party leader Willie Rennie said this had 'determined, after careful consideration, that there are no grounds for action against David Steel'.
His suspension has now been lifted, with Lord Steel saying the party has 'cleared my name'.
He said: "I am naturally pleased and relieved the executive of the Scottish Liberal Democrats has completed their investigation and, after fully considering my responses to questions at IICSA, has lifted my suspension from the party and cleared my name."
He said he had voluntarily given evidence to the abuse inquiry and had 'offered open and honest answers, some of which have been erroneously reported and taken out of context'.
Lord Steel continued: "These inaccurate elements led some to question my own such commitment. Opinions and assumptions are not facts and those expressed in some quarters have caused me great personal distress.
"Throughout my career, I have always acted to uphold the highest standards.
"I look forward to contributing to the party's cause and focusing on the shared commitment we have had for many years, which is to lead to improve the life opportunities of all young people, especially those who have had the toughest start."
Mr Rennie stressed it was important that the party had carried out the investigation because 'we take the issue of vigilance and safeguarding incredibly seriously'.
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But he stated: "The clarifications that David Steel has provided to us state clearly that Cyril Smith did not confess to any criminality which is why he took no further action at the time."
Mr Rennie added: "David has also welcomed the changes to the country's laws, procedures and policies on child protection, and that the party's procedure for handling complaints about its members has improved.
"David makes clear his lifelong commitment to safeguarding and vigilance with a recommendation to the party on how to strengthen the system of candidate approval.
"David Steel's national and international reputation is beyond doubt and this has been a difficult matter for us to consider but it is important for everyone to understand that the Liberal Democrats will always investigate such serious matters."
But lawyer Richard Scorer, who represents some of those alleging abuse by Smith, said the party's decision was 'disappointing'.
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Mr Scorer, of law firm Slater and Gordon, also claimed it was "premature" of the Liberal Democrats to conclude their investigation without waiting for the findings of the abuse inquiry.
He said: "Lord Steel's evidence and the dismissive way in which he delivered it was truly shocking. The least my clients are owed is for the matter to be investigated in a thorough, open and transparent way rather than behind closed doors."
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