Health Minister Mary-Anne Thomas confirmed on Wednesday charges against the department had been dropped by the Director of Public Prosecutions.
Worksafe charged the Department of Health in September 2021 with 58 breaches of the Occupational Health and Safety Act, after a 15-month investigation.
"WorkSafe is deeply disappointed by the decision to discontinue criminal proceedings against the Department of Health in relation to the Victorian hotel quarantine program," a spokesperson said in a statement.
 "As an independent regulator, WorkSafe strives to enforce the highest standards of health and safety for workers and the community it serves."
Victoria's second COVID wave resulted in over 18,000 infections, 800 deaths and a 112-day lockdown. (Con Chronis/AAP PHOTOS)
More than 40 charges alleged the department failed to ensure, so far as was reasonably practicable, that persons other than employees were not exposed to health and safety risks arising from conduct of its undertaking.
Another 17 charges allege the department failed to provide and maintain an environment as safe and without risk to health for its employees.
In March 2023, a magistrate found there was sufficient evidence to support a conviction and sent the matter to the County Court for trial, which was scheduled to begin on Monday.
However, the department applied to the court to have the matter discontinued - and the Office of Public Prosecutions agreed to it - on Tuesday.
That had come after an April 9 ruling by the County Court to exclude evidence produced by a judicial inquiry into the hotel quarantine scheme.
The department was responsible between March and July 2020 for the state's first hotel quarantine program.
The judicial inquiry into the program found 99 per cent of Victoria's second wave of COVID-19 cases could be traced back to security guards who became infected at the Rydges on Swanton and Stamford Plaza hotels in May and June 2020.
The second wave resulted in more than 18,000 new infections, 800 deaths and a lockdown that lasted 112 days.