Wiltshire police have offered reassurance that the investigation is over.
A spokesman said: "We have been carrying out enquiries following a report from a ten-year-old child about a man acting suspiciously in Gloucester Road, Malmesbury, on Tuesday afternoon.
“Our enquiries are now complete and we want to update the public that the child involved has been spoken to by officers and has clarified that it was a misunderstanding.
“We are no longer investigating and we want to reassure the local community that the matter has been resolved.
“We hope this sends a clear message that reports of this nature will always be taken seriously and people should always call 101 if they have concerns about suspicious activity in their area.”
Police had issued a description of a man they were looking for, though they said the child was not grabbed or injured. They also stepped up patrols in the area and as a precaution, and Malmesbury primary school had warned parents that children would not be allowed to leave school unaccompanied.