The 51-year-old peer was at the wheel of his gold coloured X Type Jaguar when it ploughed into an Audi A4 that had broken down in the fast lane of the M1 near Rotherham.
Now almost a year after the death Lord Ahmed will appear before Magistrates in Sheffield on a date to be fixed.
As part of the investigation traffic police examined Lord Ahmed's mobile phone on which he made a 999 call from the scene.
It was alleged that shortly before the emergency call a text message was sent to a journalist.
South Yorkshire Police investigators submitted a detailed file to the CPS who have now decided there is insufficient evidence for a charge of death by dangerous driving.
Instead the peer will face a lesser charge of dangerous driving.
A South Yorkshire Police spokesman said: "On advice from the Special Crime Division of the CPS, a 51-year-old Rotherham man will be issued with a summons to appear at Sheffield Magistrates Court in relation to driving his motor car dangerously on the southbound carriageway of the M1 between junctions 40 and 35 on December 25, 2007."
The victim, Slovakian Martyn Gombar, died instantly in the impact and Lord Ahmed suffered severe facial injuries and shock.
The Audi hit the crash central crash barrier , spun round and ended up facing the wrong way on the southbound carriageway near to Junction 35 at Thorpe Hesley, near Rotherham.
The driver and one passenger managed to reach the hard shoulder but police believe the driver then tried to dodge fast moving traffic at 6.20 pm on Christmas Day, to get back to his car to retrieve his mobile phone and call for help.
The car belonging to Pakistani born Lord Ahmed , who has lived in nearby Rotherham since he was a child, then hit the car and driver.
At least four other vehicles were also involved in the crash.
The dead man had been living in the Leigh area of Lancashire. His passenger, also a Slovakian was arrested by police and questioned.
Lord Ahmed, along with three other people, was taken to Rotherham District General Hospital where he was treated for his injuries and was allowed home later.
At the time although still badly shaken he confirmed he was at the wheel of his Jaguar car when it struck the Audi. He confirmed he was injured and treated in hospital before being allowed home.
At his home in Rotherham he said soon after the accident : "I was just driving along when I saw a red Audi facing the wrong way -- it was absolutely horrendous but I don't want to talk about it.
"I am not able to say much about the accident because the police are still investigating the case.
"It was terrible. There was a red car in the third lane facing the wrong way and there was nothing I could do."
Lord Ahmed, a father-of-three, was only minutes from his home in Rotherham when the tragedy happened. His passengers, his 49-year-old wife, Sakina Bibi, and his mother in her mid-80s, suffered bruising.
Sakina said of her husband: "He's in shock. He has cuts and bruises."
The Labour peer -- whose official title is Lord Ahmed of Rotherham -- became the first Muslim in modern times to become a lord when he was appointed to the House of Lords in 1998.
In November last year he flew to Sudan and negotiated the release of British teacher Gillian Gibbons , jailed for allowing children in her class to call a teddy bear Muhammad.