South Wales Police alleged Detective Sergeant Andrew Whelan failed to investigate Crimestoppers and witness complaints about Watkins in 2010.
Watkins was sentenced to 35 years in 2013 after admitting a string of child sex offences.
A tribunal panel found it "inappropriate" to make any findings of misconduct against the officer.
Det Sgt Whelan was accused of failing to act on information about Watkins given to Crimestoppers three times between March and October 2010.
Jonathan Walters, for South Wales Police, told the tribunal: "You failed to take any action in relation to those logs."
The second allegation was that Det Sgt Whelan failed to react to a complaint from an unnamed member of the public in October 2010 that Watkins had "child pornography on his computer and that he fantasised about abusing children".
John Beggs QC, representing Det Sgt Whelan, described him as an "exemplary officer", who was dedicated to his duty and had an "unblemished" 25-year career.
"He had six years of unrelenting hell where he worked many more hours than he was being paid, and was frequently working 18 hour days," he said.
"This was an isolated out-of-character incident in difficult circumstances."
Tribunal panel chairman Robert Vernon said: "It was an uncharacteristic lapse of judgement from an officer who was otherwise carrying out his duties in a diligent and professional manner.
"It was a decision taken in very difficult circumstances, bearing in mind his workload and professional and personal circumstances at that time."
A detective who investigated paedophile Lostprophets singer Ian Watkins has been cleared of misconduct.