Australia had considered a charge of inciting genocide against Israel
The Australian government has abandoned plans to take international legal action against Iranian president Mahmoud Ahmadinejad.
Mr Ahmadinejad has made several anti-Israel remarks in past speeches.
Australian foreign minister, Stephen Smith, told parliament he did not wish to "give further profile to these obscene remarks".
He also cited the complexity of the issues and the high legal threshold required to bring forward a case.
Australian Prime Minister Kevin Rudd threatened in May to take Mr Ahmadinejad to the International Court of Justice for inciting genocide against Israel.
The Islamic Republic does not officially recognise the Jewish state.
Since becoming president in 2005, Mr Ahmadinejad has provoked outraged reactions by predicting that Israel is doomed to disappear.
In October 2005, the Iranian president made a statement in which he envisaged the replacement of Israel with a Palestinian state.
This was widely translated as a call for Israel to be "wiped off the map," although the precise translation of the remarks is disputed, and some suggest a more accurate rendering would be "the regime occupying Jerusalem should vanish from the page of time".
Mr Smith said the Australian government also dropped the case as it "would not want such legal action to complicate or distract from the international community's efforts to address the serious concerns about Iran's nuclear program and its failure to abide by binding United Nations Security Council resolutions".
He said Australia would impose new financial and travel sanctions on 20 Iranian individuals and 18 organisations - including banks Melli and Saderat - which contribute to Iran's nuclear and missile programs.
Iran's refusal to halt sensitive nuclear activities has sparked three sets of UN Security Council sanctions as well as US and European sanctions. Iran maintains that its uranium enrichment programme is strictly for civilian purposes.