Ebrahim Sheikh, leader of the largest pro-reform student organisation, said the ruling was unjust.
A military court acquitted Tehran's former police chief Brigadier-General Farhad Nazari of all charges arising from the attack last year.
The students had gathered to protest against laws on press freedom and the closure of a reformist newspaper, Salam.
The court also acquitted 17 policemen acting under General Nazari's orders.
However, it sentenced policeman Farhad Arjomandi to two years imprisonment for refusing to obey orders and beating students.
His colleague Orjali Babrzadeh was also sentenced to three months jail and a $120 fine for stealing a student's electric razor in the attack.
The BBC's Iran affairs analyst, Sadeq Saba, says the court ruling shows opponents of reforms in Iran are not intending to give up power.
He adds that conservatives may have timed the announcement of the verdict with President Khatami's high-profile first visit to Germany in order to inflict maximum damage to his image.
On Saturday, the first anniversary of the campus attack, students fought street battles with riot police and hardline vigilantes.
Student payouts
The plaintiffs in the three-month trial were mostly students severely beaten in the attack.
General Nazari was charged with disobeying the interior ministry's directives and creating public mistrust towards the police.
In the trial, one of the students' lawyers, reformist Mohsen Rahami, said the police attacked students on purpose.
He called for compensation for the injured.
Students said the police used clubs, irons bars and chains on them.
One student said he was thrown out of a third-floor window.
The court ruled the policemen would not be personally liable to pay compensation.
It instead ordered the state to make payments to 34 students.
Mr Nazari smiled on hearing the verdict while other policemen shouted and began praying.
Students facing charges
One of the plaintiffs told the BBC last week that he was extremely unhappy with the way the case had been conducted.
The student is still suffering from injuries received when police and vigilantes burst into his bedroom at the dormitory, beating him up and smashing his property.
He said some students were themselves facing charges instead of being regarded as victims.
Lawyer Mr Rahami was also arrested recently on other charges.