The man, aged in his early 40s, was detained on suspicion of racially aggravated criminal damage.
He was sectioned under the Mental Health Act after his arrest on Wednesday.
Police were alerted to a reports of a male spraying walls near a synagogue in Belsize Square at 7.40pm on October 30.
Officers established that other swastikas had been sprayed on walls elsewhere in the surrounding area.
Police said he has been released and told that no further action will be taken.
A Met statement said: “Detectives continue to work close with the local authority and communities within Belsize Park.”
Anyone with information is asked to call police on 101 or to remain anonymous Crimestoppers on 0800 555 111.