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The Nigerian international, signed by the Foxes for £16million last summer, was quizzed by police for two hours on suspicion of common assault.
Officers arrived at Musa's home just hours after Leicester's 2-0 win over Sunderland on Tuesday night, a match which the 24-year-old didn't play in.
He has played just 14 minutes of football since Craig Shakespeare replaced Claudio Ranieri as Leicester's manager in February.
A statement by Leicestershire Police on Thursday morning read: "A 24-year-old man arrested on suspicion of common assault has been released with no further action.
"The man was arrested from his home address near Leicester yesterday morning."
A Leicester City statement said: “We are aware that Ahmed Musa has today (Wednesday) cooperated with a police inquiry relating to a disturbance in the early hours of this morning.
“The inquiry has since been closed and no further action is to be taken.
"We see no reason for formal action internally, though Ahmed will be given the opportunity to discuss the matter with football management when the squad returns to training on Friday."
Musa wished his wife a happy birthday on Instagram on Wednesday.
He wrote: "On this special day, may you have: All the joy, your heart can hold; All the smiles, a day can bring; And all the blessings, a life can unfold.
"May God bestow you with His bounties and blessings!
"Happy Birthday, To my Queen."
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