The Spaniard had been under investigation for the incident involving Jose Maria Zamora at the Spanish Amateur Championship in September.
In a statement issued by the European Tour on Friday, George O'Grady, who takes over as Executive Director in January, said: "There was an incident. Both Seve and Jose Maria regret that it took place.
"Words were spoken in the facilities of a private golf club and Seve accepts that he should have talked to Jose Maria in private so that the issue was left between the two of them.
"I have had a full and frank talk with Seve and I am now aware how bad he feels about the whole situation.
"We do not condone what took place but there are mitigating circumstances for an incident so totally out of character during a career stretching more than 30 years."
Ballesteros, who has won two U.S. Masters and three British Open titles, said: "I am aware who I am and what I represent and thus regret what happened.
"As far as the incident is concerned, I apologise to the European Tour and to those affected by my wrong manners."
Zamora, an accomplished player who could have turned professional had he not joined the tour's administrative staff, won the over-35s event at Pedrena where the alleged incident was reported by the Spanish Federation.
In March last year he was pictured arguing with Ballesteros in the clubhouse car park during the Madeira Island Open after the Spanish player was given a warning for slow play.