All 29 people on board were killed when the helicopter crashed on the Mull of Kintyre in 1994.
It was the worst peacetime disaster in the RAF's history, with some of Britain's top security experts among the dead.
An initial review found the two pilots, Flight Lieutenants Jonathan Tapped and Richard Cook, guilty of "negligence to a gross degree".
The verdict was later called into question by aviation experts, RAF pilots and politicians.
Seventeen years after the crash, Defence Secretary Liam Fox announced yesterday that an independent review has cleared the pilots of responsibility for the crash.
Lord Philip's review concluded that the two pilots should never have been accused of gross negligence.
Lord Philip said: "We find it regrettable that the department should have taken such an intransigent stance on the basis of an inadequate understanding of the RAF's own regulations in a matter which involved the reputation of men who died on active service."
The Church of Scotland was a longtime advocate of an independent review into the disaster.
The Moderator of the General Assembly, the Rev David Arnott, hailed the decision.
"Thankfully now their memories can be mourned and, after the years of waiting, hopefully the families can find some solace in the conclusions of Lord Philip's report," he said.
"I am so happy for them that the names and reputations of these two men have finally been restored. At last, justice has been done."