Twenty four-year-old Shana was killed in the Gaza Strip in April this year after an Israeli tank crew fired on the car he was driving, despite the fact it was clearly marked as a press vehicle.
Reuters editor-in-chief David Schlesinger called for an investigation into the incident at the time. However in a letter, Israel's senior military advocate-general told Reuters that the troops could not see whether Shana was operating a camera or a weapon and were justified in firing a shell packed with darts into the vehicle. Eight Palestinians aged between 12 and 20 were killed at the same time.
Brigadier general Avihai Mendelblit wrote: "The tank crew was unable to determine the nature of the object mounted on the tripod and positively identify it as an anti-tank missile, a mortar or a television camera."
Reuters said it was disturbed by the conclusion, saying it would curtail the freedom of the media to cover the conflict by giving soldiers a "free hand to kill without being sure that there were not firing on journalists".
Schlesinger said: "I'm extremely disappointed that this report condones a disproportionate use of deadly force in a situation the army itself admitted had not been analysed clearly. They would appear to take the view that any raising of a camera into position could garner a deadly response."
Shana had been in the area after Israel launched an air raid in a bid to kill Hamas gunmen who had attacked and killed three Israeli soldiers.
Two years before his death, Shana had been wounded in an Israeli air strike. Reuters said that on this occasion, the vehicle in which he was travelling was also marked as being press.
The final moments of footage shot by Shana can be viewed .
It is the second time a Reuters cameraman has been killed by friendly fire in recent years after a camera has been mistaken for a weapon.
In the early days of the war in Iraq, US troops in Baghdad mistook a television camera for a rocket-propelled grenade launcher and killed Mazen Dana, 41.
He died while filming a mortar attack by Iraqi insurgents on a prison in the Iraqi capital.
A year later a TV journalist working for Arab satellite station Al-Arabiya was shot dead by US troops as he filmed a report in Baghdad.
In 2007 95 journalists and other media workers were killed with almost half of those deaths occurring in Iraq.
According to research by the World Association of Newspapers, 44 were killed in Iraq, with war- torn Somalia being the second deadliest place for journalists, with eight killed.