Mechtild Schröer, 50, of Minden, Germany, was shot at about 9 p.m. in the 400 block of Mason Street, near Union Square.
Police said she was apparently caught in the crossfire of a shootout between two groups of people outside a private party on that block.
Phillip Stewart, 18, was arrested following the shooting, but Tuesday afternoon, prosecutors said they did not have enough evidence to charge him.
"The case remains under active investigation," district attorney's office spokesman Seth Steward said in a statement.
He said investigators are continuing to collect ballistics evidence, gunshot residue and video evidence in the case.
"Currently, there is no positive identification" of Schroeer's killer, Steward said.
chröer was walking in the area when at least two people opened fire as a large crowd gathered outside the party, police said.
She and her husband Stefan had been visiting the U.S. and were staying at a nearby hotel at the time, according to police.
Two teens, a 15-year-old boy and a 19-year-old woman, both from San Francisco, were also struck by bullets and survived.
Police said the three shooting victims were not the intended targets.
Officers detained Stewart and four others in a car that a taxicab driver saw fleeing the scene of the shooting, police said.
Homicide investigators arrested Stewart on suspicion of murder Monday. He was released overnight.
The four others, two adults and two juveniles, were released pending further investigation.
"We still are looking for additional suspects," police spokesman Officer Samson Chan said Tuesday afternoon.