The defence department's inspector general had been investigating him over a complaint filed in March.

A watchdog accused him of "promoting" Boeing and "disparaging" its competitors during meetings.

But the inquiry found that Mr Shanahan had "fully complied with his ethical obligations and ethical agreements".

Mr Shanahan, who worked at Boeing for 30 years, was serving as deputy defence secretary at the time the allegations were made.

The report on the inspector general's findings has been released publicly. It will be submitted to Congress on Thursday.

The outcome could pave the way for US President Donald Trump to nominate Mr Shanahan as permanent defence secretary.

The White House is yet to comment on who Mr Trump intends to appoint to the role - the Pentagon's highest civilian position.

Donald Trump and Patrick Shanahan (L) attend a briefing with military leaders at the White House

The complaints against Mr Shanahan were filed by Citizens for Responsibility and Ethics in Washington.

Mr Shanahan always denied the allegations but said he would support the investigation.

As part of the inquiry, more than 30 witnesses were interviewed, including Mr Shanahan, and 1,700 pages of classified documents were reviewed.

The inspector general "took these allegations seriously", Pentagon official Glenn Fine, who oversaw the investigation, said.

"The evidence showed that Acting Secretary Shanahan fully complied with his ethical obligations and ethical agreements with regard to Boeing and its competitors," his statement said.

Mr Shanahan has served as interim Pentagon chief since 1 January after his predecessor, Jim Mattis, resigned over policy differences with Mr Trump.

To secure the position full-time, the Senate will have to confirm him in a vote.

Lawmakers, including the late Arizona Senator John McCain, have expressed concerns over his lack of military and foreign policy experience.

Prior to his public service, he rose through the ranks to become a senior executive at Boeing, the world's biggest plane maker. His career there spanned from 1986 to 2017.