Miss Hill, 37, the Guardian's special investigations correspondent was questioned under caution last September by detectives investigating alleged leaks about the phone hacking inquiry.
Her questioning came after a 51-year-old detective constable was arrested on suspicion of passing unauthorised information to the newspaper.
The officer had been working as part of the Operation Weeting team appointed to investigate claims of widespread phone hacking at Rupert Murdoch's News of the World.
Last month the CPS confirmed that the Metropolitan Police had passed the relevant files for prosecutors to consider whether to bring criminal charges against the pair.
But in an announcement this morning, Alison Levitt QC, Principal Legal Advisor to the Director of Public Prosecutions said: "All the evidence has now carefully been considered and I have decided that neither the police officer nor the journalist should face a prosecution."
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Phone hacking: timeline of the scandal
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Phone hacking: Guardian journalist questioned
07 Sep 2011
Sun's Whitehall Editor arrested in Met probe
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Met detective held in connection with hacking
19 Aug 2011
Rebekah Brooks arrest: the media response
She added: "I have concluded that there is insufficient evidence against either suspect to provide a realistic prospect of conviction for the common law offence of misconduct in a public office or conspiracy to commit misconduct in a public office."