U.S. Attorney David Nahmias said there were too many hurdles to securing a death sentence against Nichols, who was sentenced to life without parole in December for the 2005 rampage.
But Nahmias did not entirely rule out a federal prosecution, saying he would reconsider bringing charges if Nichols challenges his sentence or "if his security situation changes."
The trial was held amid unusually high security because of the nature of Nichols' crimes and because prosecutors say he has continued to plot another escape.
Nichols, 37, was found guilty in November of murdering Superior Court Judge Rowland Barnes, court reporter Julie Ann Brandau, Deputy Hoyt Teasley and federal agent David Wilhelm in a shooting spree that began in a downtown Atlanta courthouse.
He was spared the death penalty when a Fulton County jury failed to reach a unanimous death penalty verdict, as required by Georgia law.
Local prosecutors encouraged their federal counterparts to bring additional charges in hopes Nichols could still face lethal injection after he avoided the state's death penalty.
Nahmias, though, signaled a federal prosecution would have been daunting - and still may not have secured a death penalty.
He said any federal charges would be limited to the murder of Wilhelm, the federal agent, and would have required a higher standard of proof than in the state case. Even then, he said, a federal jury might not return the unanimous verdict needed to secure a death sentence.
Kent Alexander, a former U.S. Attorney in Atlanta, noted that prosecutors would have faced a steep challenge.
Authorities would have needed to prove Wilhelm was killed while in the line of duty or that Nichols knew the agent's identity, said Alexander, who is now general counsel at Emory University.
Nahmias also said there is "considerable value" in not reviving the painful case, which turned Atlanta's seat of justice into a crime scene. The lengthy trial lasted months and forced the state to pick up a defense tab that may top $2 million.
In a statement, Fulton County District Attorney Paul Howard said the decision means the community can "finally put this case to rest."