The England and Manchester City defender was questioned by police after allegedly exposing himself in a bar earlier this month.
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However, authorities have now confirmed the 32-year-old will face no further action.
A spokesman for Cheshire Police said on Friday: "On Wednesday 8 March, Cheshire Constabulary was made aware of a video circulating on social media in relation to an alleged incident at a bar in the Wilmslow area.
"Officers have now concluded their enquiries which included speaking to those directly involved.
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"A 32-year-old man from Prestbury voluntarily attended a police station for questioning on 16 March.
"He has been dealt with by an out of court disposal and the matter is now closed."
Walker has retained his place in both City and England's most recent squads.
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Meanwhile, Women's Aid have questioned the lack of action against Walker over his alleged behaviour.
Farah Nazeer, the charity's chief executive, said: "It's disappointing to see indecent exposure, a form of violence against women, being ignored and dismissed."
She added: "Whether done to shock or to intimidate, for those affected there can be long-term effects and trauma, stopping women from feeling safe and from living with freedom.
"When there are no repercussions to indecent exposure, it can give the perpetrator a sense of power, reinforcing to them what they can get away with and, possibly, the confidence to see what more they can get away with next time.
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"Any indecent exposure must be treated as the serious crime it is and the consequences must demonstrate that it is intolerable.
"Today's culture of accepting violence against women and girls must end, women's lives depend on it."