A Warsaw prosecutor's office spokesman said that investigators had sought to establish whether brandishing the huge "Legia Jihad" banner, written in Arabic-style letters, fell under rules against racism and neo-Nazism.
Spokesman Dariusz Slepokura said that while the banner's presence at the September 29 Europa League match in Warsaw was outrageous and offensive, it was a case of stupidity by a group of fans and not a crime.
At the start the Group C game—which Legia won 3-2—a group of fans unfurled the banner across three blocks of a stand.
"Jihad", an Arabic term which can mean 'holy' war, is used in the name of several fiercely anti-Israeli Islamist groups. The banner was green, which is one of Legia's colours but also that of Islamist organisations.
After the incident, Legia expressed its regret and underlined that the fans had not been given permission to display the banner.
Legia's fan club, meanwhile, insisted that the term "Jihad" was simply meant to show its members' unbending support for the team.
The slogan has been used in the past when hardline fans were locked in a bitter conflict with Legia's owners.
But campaigners said the meaning was all too clear at a game involving an Israeli team, underlining that elements of the Legia crowd are known for anti-Semitic slogans.
Legia could still face punishment by European football's governing body UEFA, which can levy hefty fines on clubs for fans' insulting, provocative or politically-tinged slogans.
UEFA's disciplinary body is due to rule on November 17, a spokesman said.
Stadium racism and hooliganism are in sharp focus in Poland ahead of the 2012 European Championships, which the country will host along with neighbouring Ukraine.
Far-right and anti-Semitic banners and slogans are notably shocking given the region's World War II history, when millions perished at the hands of occupying Nazi Germany, including the overwhelming majority of its Jews.
Legia and its 15 fellow clubs from Poland's first division are taking part in a landmark campaign at the behest of UEFA, with announcers due to read out anti-racism messages ahead of this weekend's games.