Reuters says the investigation, during which none of the three was interviewed, was inadequate and should be reopened.
Lawrence Di Rita, special assistant to US Defence Secretary Donald Rumsfeld, said Central Command and Pentagon lawyers had reviewed the military's initial investigation.
"The investigation was found to be sufficient, and no basis was found to reopen it," Di Rita said in a letter dated 7 March and received by Reuters this week.
"It is unfortunate that Reuters remains dissatisfied with the action taken in regard to the incident," Di Rita said.
"I'm very disappointed that the Department of Defence has chosen not to reopen a clearly flawed investigation into a very troubling incident," Reuters Global Managing Editor David Schlesinger said on Tuesday.
The three Iraqis, along with another Iraqi freelancer working for US network NBC, were detained by soldiers from the 82nd Airborne Division on 2 January 2004 while covering the aftermath of the shooting down of a helicopter near Falluja.
"I'm very disappointed that the Department of Defence has chosen not to reopen a clearly flawed investigation into a very troubling incident"
David Schlesinger, Reuters Global Managing Editor
When they were released without charge three days later, the Iraqis said that during their detention in Forward Operating Base Volturno near Falluja they were subjected to repeated beatings, torture and sexual humiliation, similar to the abuse later uncovered at Abu Ghraib prison.
A US military investigation said soldiers had sworn under oath that they were not involved in any abuse.
After US investigations of the Abu Ghraib scandal, which criticised the leadership of Lieutenant General Ricardo Sanchez, commander of US forces in Iraq at the time, the Pentagon said it was reviewing the Reuters case to decide whether it should be reopened.
The Pentagon says abuse of prisoners in Iraq was only carried out by a few rogue soldiers, and that all accusations of abuse are thoroughly and promptly investigated. The US government says it has never authorised the use of torture.
US military documents released under the Freedom of Information Act show that scores of accusations of abuse have been investigated in Iraq and Afghanistan. There have also been accusations of torture at the US jail at Guantanamo Bay.
"Of course, I reiterate my recommendation that you consider embedding your reporters with US units. It is an excellent opportunity to cover US military activities in Iraq"
Lawrence Di Rita, special assistant to US Defence Secretary
Di Rita concluded his letter by again urging journalists to embed with US forces. "Of course, I reiterate my recommendation that you consider embedding your reporters with US units. It is an excellent opportunity to cover US military activities in Iraq," he said.