Officers had appealed for information after it was alleged a 25-year-old was threatened with a weapon and sexually assaulted by another man on Brooms Road in the early hours of Sunday.
After checking CCTV and taking witness statements, police were "satisfied no criminality has taken place".
They said they were no longer looking for a suspect.
Det Insp Bryan Lee said: "I would like to thank the public for their excellent response to our appeals for information and reassure them they can go about their normal routine.
"Our additional patrols in the area will now also return to normal levels."
Police investigating a report that a man was raped in Dumfries have now said no offence took place.