Connor Williams, 17, and Conor Tiley, 18, both from Aberbargoed, died in a crash on New Road, Tir-y-Berth, Hengoed, on 3 January.
The teenager was arrested on suspicion of causing death by dangerous driving.
Gwent Police confirmed no further action would be taken.
A 17-year-old boy arrested following a crash which killed two teenagers in Caerphilly county has been released without charge.