Footage of the fighting, posted on the internet, provoked a storm of controversy and was condemned by the Government and campaigners.
It shows the schoolboys grappling in a cage without protective padding or headgear in front of a large crowd.
One is shown breaking down in tears during the event at Greenlands New Labour Social Club in Preston earlier this month.
But Lancashire Police says it has looked into the matter fully and decided "there are no issues for us to pursue".
Earlier, the British Cage Fighting Association had described parents who allowed their children to take part as "morons".
The British Medical Association (BMA) also condemned the practice, saying it was "disturbing" that children were not wearing helmets.
A spokesman said: "Boxing and cage fighting are sometimes defended on the grounds that children learn to work through their aggression with discipline and control.
"The BMA believes there are many other sports, such as athletics, swimming, judo and football, which require discipline but do not pose the same threat of brain injury."
The NSPCC expressed concern at the young age of the children taking part.
Chris Cloke, head of child protection awareness at the charity, said: "We would strongly discourage parents from letting their children take part in this kind of fighting.
"It's quite disturbing that some of those involved in the bouts were as young as eight, an age when they are still developing, physically and mentally.
"The organisers of these activities should think very carefully before allowing children to be involved when they are egged on to inflict violence."
And Culture Secretary Jeremy Hunt described it as "barbaric" and expressed shock at the apparent lack of restrictions on the activity.
However, father Nick Hartley told Sky News he was happy for his nine-year-old son Kian to take part.
"It's more wrestling than fighting… there's no punching and kicking, it's a controlled sport," he said. "He (Kian) enjoys doing it, so leave him to do it."
Michelle Anderson, who owns the club which staged the event, insisted there was little risk and compared it to boxing.
"The children were grappling. The cage fighting only comes when they get older," she said.
"We hold boxing events here and kids fight then and nobody's complained about that.
"It's just the name cage fighting that people are getting annoyed at or they criticise it because they know nothing about it."
Andy Whiteside, one of the men who trains the children, said: "It's being blown out of all proportion.
"(Our gym) takes part in tournaments where it's the exact same, it just isn't in a cage."
Despite the criticism, the club has said it intends to stage similar events in the future.Post published in: World News