Mohamed was accused of making a hoax bomb, handcuffed and questioned, and received a three-day suspension from the Irving, Texas high school over the clock he put together to impress his new classmates and teachers.
No charges were filed and police said they would review the decisions officers made in his arrest.
In the wake of the incident, Mohamed won praise for his ingenuity and also received several invitations, including one from President Barack Obama to visit the White House.
The arrest sparked allegations of racial and religious profiling, and the Council on American-Islamic Relations called the case an example of the climate of hate and manufactured fear around the religion.
The news comes as Muslim Americans have responded with frustration, exasperation and anger to what many see as a growing wave of Islamophobia fueled by two of the Republican Party's most popular presidential candidates, Donald Trump and Ben Carson.
Ben Carson on Sunday said that Muslims were unfit to be president of the United States, arguing their faith was inconsistent with American principles. He said on Monday that he "absolutely" stood by his comments.
Al Jazeera and Reuters
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