David Lynn (pictured above holding a placard, library image) , a pastor from Canada, was detained outside Barking underground station after a female passer-by told officers he made homophobic comments.
Mr Lynn denies that he called a homosexual lady "perverse" and "sinful" as he told shoppers that love can only be truly found through a right relationship with Jesus.
He said: "What happened on Tuesday shocked me, and I am grateful to the Christian Legal Centre (CLC) for responding immediately to my arrest and helping me avoid being charged".
Lawyers supporting Mr Lynn say he was arrested without being given the opportunity to explain his account of what happened.
Representatives at the CLC say police admitted that officers were wrong to arrest him and they expressed regret over his 20-hour detention at the Fresh Wharf Custody Base in Barking.
Chief executive, Andrea Williams said: "The police's readiness to arrest David is another example of the freedom of street preachers being curtailed.
"We are delighted that he has not been charged for sharing the good news of Jesus, and we remain committed to providing expert legal support, free of charge, where street preachers face trouble with the police."
Lawyers for Mr Lynn, who leads a church in Toronto, claims he was freed on Wednesday after police admitted they were wrong to arrest him.
Mr Lynn, who was never received a conviction during 22 years' experience as a street preacher, all leads Christ's Forgiveness Ministries.
Premier has contacted the Metropolitan Police for a comment.
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