Kevin Clash, who has provided the voice of the lovable puppet since 1984, was accused of having relations with a 16-year-old male seven years ago, when he was aged 45.
Clash was granted a leave of absence from the show while the claims were investigated, but the unidentified accuser, now 23, has backtracked over his claims, admitting the relationship occurred when he was over the age of consent.
A statement from the man's lawyers, Andreozzi & Associates, reads: "He wants it to be known that his sexual relationship with Mr. Clash was an adult consensual relationship. He will have no further comment on the matter.”
After the allegations were dropped, Clash released his own statement, which reads, "I am relieved that this painful allegation has been put to rest. I will not discuss it further."
A representative for Sesame Street adds, "We are pleased that this matter has been brought to a close. We are happy that Kevin can move on from this."
The unnamed accuser initially approached Sesame Street executives in June (12) and claimed he became involved with Clash seven years ago. Clash, 52, denied the allegations.
Producers released a statement, revealing their star had "exercised poor judgment and violated company policy regarding Internet usage".
It is not known when Clash will return to work.