In a statement Wednesday after a fourth round of questioning before magistrates, Lagarde said she would return to her work in Washington later in the day and said the decision was "without basis." She is the third IMF managing director in a decade to face legal troubles.
She and her former chief of staff face questions about their role in a 400 million-euro ($531 million) payment to a businessman with a checkered past.
"After three years of proceedings, dozens of hours of questioning, the court found from the evidence that I committed no offense, and the only allegation is that I was not sufficiently vigilant," she said in her statement.
Under French law, the official investigation is equivalent to preliminary charges, meaning there is reason to suspect an infraction. Investigating judges can later drop a case or issue formal charges and send it to trial.
The payment in question was made to Bernard Tapie during a private arbitration over a dispute with state-owned bank Credit Lyonnais over the botched sale of sportswear company Adidas. Critics have said the deal was too generous, and was symptomatic of the cozy relationship between money and political power in France.
At the heart of Lagarde's questioning was her role in the unusual decision to handle the payout privately, rather than through the French legal system.
Tapie, one of France's most flamboyant businessmen, was a prominent supporter of then-President Nicolas Sarkozy. Before buying control of Adidas, Tapie had been embroiled in several scandals, including match-fixing in the early 1990s that led to an eight-month prison sentence.
The court investigating the Tapie payment has been set up specifically for allegations of wrongdoing committed in office. Lagarde's former chief of staff - now head of the French telecom giant Orange - and Tapie both are under formal investigation for fraud.
Lagarde became French finance minister in 2007 under Sarkozy, the first woman to hold the post in a G-7 country.
Her predecessor at the IMF, Dominique Strauss-Kahn, quit after he was charged with attempted rape in the United States. The New York charges were later dropped. Strauss-Kahn is charged with aggravated pimping in a separate case in France.
A previous IMF chief, Rodrigo Rato, faced allegations of fraud in Spain after the bank he led as chairman collapsed. The collapse of Bankia came well after Rato's tenure in the Washington-based IMF ended in 2007.