The decision not to punish two police marksman over Harry Stanley's killing was not a green light for a shoot-to- kill policy, a police watchdog warned.
Mr Stanley was carrying a table leg in a plastic bag
The Independent Complaints Commission defended not taking disciplinary action against the officers who mistook a table leg he was carrying for a gun.
But Mr Stanley's widow Irene said the move meant innocent people were "at greater risk" from armed police.
The IPCC also said the accounts of the two officers "lacked credibility".
And it called for an overhaul of the way firearms were dealt with following fatal shootings.
Mr Stanley, originally from North Lanarkshire, had been carrying a coffee table leg in a blue plastic bag when the officers opened fire as he walked home from a pub in Hackney, east London, in September 1999.
The officers arrived on the scene having been wrongly tipped off that the painter and decorator was carrying a sawn-off shotgun in the bag.
Inspector Neil Sharman shot the father-of-three in the head, killing him instantly, while Pc Kevin Fagan also opened fire.
Criminal charges against the two officers involved in Mr Stanley's shooting were ruled out by the Crown Prosecution Service last October, while Surrey Police recommended no disciplinary action should be taken.
The IPCC report on Thursday concluded the officers' actions were "appropriate in the circumstances".
Mrs Stanley said in a statement afterwards that she was "bitterly disappointed" by the IPCC decision to accept Surrey Police's recommendation.
"This isn't justice. The public can't have confidence in a system that ends this way," she said.
However, IPCC Commissioner Deborah Glass refuted claims that the decision not to discipline the officers gave the police licence to act with impunity.
"We understand Mrs Stanley will be disappointed by this decision," she said. "She has fought for a very long time for what she believes to be justice.
"The evidence here does not justify disciplinary action."