Sir Elton has a substantial collection of photographic art

The photo, Klara and Edda Belly Dancing by American Nan Goldin, was taken from Gateshead's Baltic gallery by Northumbria Police on 20 September.

It was withdrawn the day before it was due to go on display.

The CPS had first considered the image of two naked young girls in 2001, but it was then deemed not to be indecent.

Kerrie Bell, head of the CPS Northumbria South Unit, said the CPS had to consider whether "standards of propriety" had changed since 2001.

'Legitimate defence'

She said that to consider the photograph indecent now, the CPS would have had to be satisfied standards had changed so much that it would be likely a court would now conclude the image was indecent.

But she said: "I am not satisfied that is the case.

"Even if the photograph was now considered to be indecent, a defendant would be able to raise a legitimate defence, given that the photograph was distributed for the purposes of display in a contemporary art gallery after having been deemed not to be indecent by the earlier investigation.

The Baltic hosts regular exhibitions of contemporary art

"Accordingly, I am of the opinion that the evidence is insufficient to justify proceedings for offences of possession or distribution of an indecent photograph."

The "Thanksgiving" exhibition, which contained a further 148 photographs owned by Sir Elton, went ahead in September.

It was due to run until 20 January, but after nine days the singer asked for them to be removed, and the exhibition closed.

After Friday's announcement the Baltic said in a statement: "We are pleased that this matter has now been resolved.