The investigation by the agency's Office of Professional Responsibility concluded that the Associate Attorney General "did not engage in professional misconduct or exercise poor judgment," according to a copy of a Justice Department memo obtained by news agency AP.
The internal review stemmed from complaints about the agency's decision last year to bypass a recommendation by one of its own witnesses and lower the amount it was seeking in remedies from tobacco companies.
"Based on the results of our investigation, we found that your actions in seeking and directing changes in the remedies sought were not influenced by any political considerations but rather were based on good-faith efforts to obtain remedies from the district court that would be sustainable on appeal," the memo stated.
It comes as Democratic Senator Richard Durbin said he would no longer seek to block Mr McCallum's ambassadorial nomination. Spokesman Nadeam Elshami said the senator "has been reassured by OPR that Mr McCallum was not engaged in improper political influence" in the tobacco case.
Mr McCallum's nomination still must go through the Senate Foreign Relations Committee before going to the full Senate for confirmation. The committee has not scheduled a hearing.
The last US ambassador to Australia, John Thomas Schieffer, completed his term in February of last year. Mr Schieffer's deputy, William A. Stanton, has been the embassy's charge d'affaires during the 15 months since.
Not over yet
But while the Justice Department has cleared Mr McCallum, a Washington Judge has decided that he must undergo questioning in a lawsuit by a private group seeking records about the Justice Department's conduct in the landmark tobacco case.
The group, Citizens for Responsibility and Ethics in Washington alleges in its lawsuit that the US Justice Department has failed to produce a single responsive document to demands for information under the Freedom of Information Act.
The civil racketeering case alleges cigarette companies knowingly engaged in deception for decades by denying that nicotine was addictive and minimising the dangers of smoking.