Football Association of Wales chief executive Jonathan Ford has apologised for saying the next manager of Wales would "definitely not" be English.
The governing body has said no further action will be taken after it was accepted Ford's comments were "taken out of context and not in the manner in which they were intended".
The FAW council voted on Tuesday that a comment Ford made to BBC Sport Wales about Chris Coleman's successor should be explored further, with a three-man disciplinary commission set up.
But the FAW, in a statement posted on its official website on Thursday, said Ford has clarified his comments, where he repeated details of a previous conversation, and apologised for them.
"Following the discussions today, it was accepted that the documented comments were taken out of context and not in the manner in which they were intended," said the FAW statement.
"The CEO has apologised for the statement and the FAW officers, having reviewed the situation, do not propose to take the matter any further."
Some members of the 34-strong FAW council felt Ford's remark could be viewed as potential racism by outsiders.
The FAW is a strong supporter of anti-racism campaigner Kick It Out and it was decided to set up a disciplinary commission to examine Ford's comment.
But following meetings between Ford, FAW president David Griffiths and vice-president Kieran O'Connor the matter has now been resolved.
Ford, who has been FAW chief executive for the last eight years, will now head up a seven-man panel to find the next Wales manager.
The FAW stressed in a statement that the search for a new manager will be conducted in an "open and objective fashion" and "the appointee will be the best person for the role".
The FAW hopes to appoint a new manager before the first UEFA League of Nations draw takes place in Switzerland in January 24, a process which would have inevitably been delayed had Ford faced disciplinary action.