A statement by the National Highway Traffic Safety Administration (NHTSA) said Tesla's move to modify Model S batteries with three additional layers of protection should be enough to prevent fires in the car in future.
The NHTSA said the addition of increased underbody protection should reduce both the frequency of underbody strikes and the resultant fire risk."
"Accordingly,the investigation is closed," it added.
The safety probe was launched after two separate car fires in the US states of Washington and Tennessee last year.
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In both cases, the cars involved hit debris on the road that pierced the chassis and caused a battery fire. Both cars were gutted by fire although the drivers in each incident escaped unharmed.
A third case was also reported in Merida, Mexico.
The investigation had been a rare blip of bad news for Tesla, which was founded by entrepreneur Elon Musk and specializes in high-end electric vehicles.
Despite the shadow cast by the fire investigation, last month Consumer Reports hailed Tesla's Model S as the top vehicle of 2014, describing it as a "technological tour de force."
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Musk said in a statement on Tesla's website that the modification made to the Model S would dramatically reduce the risk of fires in future.
"We felt it was important to bring this risk down to virtually zero to give Model S owners complete peace of mind
"Starting with vehicle bodies manufactured as of March 6, all cars have been outfitted with a triple underbody shield."
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