Police confirmed on Thursday afternoon that a 39-year-old man arrested for questioning had since been released without charge.
Sinn Féin North Belfast MLA Gerry Kelly has since welcomed the release and, claiming that there was no evidence to justify the arrest in the first place, slammed police for creating "political hysteria".
"The Serious Crime Branch of the PSNI has questions to answer in arresting a high-profile republican who has always supported the peace process," he said.
"The PSNI created political hysteria, which some in the media and unionist politicians latched on to and exacerbated by making clearly ludicrous statements."
In one move, this has shown poor political leadership from unionism and at the same time damaged policing in the republican community.
Gerry Kelly, Sinn Féin
Sean Kelly remains on an early release licence under the terms of the Good Friday Agreement.
He received nine life sentences for his role in the 1993 Shankill bombing, but was released in 2000.
He was returned to prison five years later, when his licence was revoked by the then Northern Ireland Secretary of State Peter Hain amid allegations of further involvement in terrorism.
Kelly was then released again in July 2005 - the day before the IRA ordered a ceasefire.
Earlier, the DUP called for current Northern Ireland Secretary Theresa Villiers to urgently review Kelly's licence.
DUP First Minister Peter Robinson said there were "potentially grave consequences for the process" and that his party would want to meet with the Chief Constable regarding the case.
Responding to Mr Robinson's statement, Sinn Féin deputy First Minister Martin McGuinness said: "The violence related to extreme loyalist protests in recent weeks represented a serious challenge to the political process. We in Sinn Féin kept our nerve.
"The assertion that this shooting in north Belfast - which I unreservedly condemn, and the facts of which are at this stage under PSNI investigation and are unclear - should threaten the political process is, frankly, ridiculous.
"The DUP should keep their nerve."
TUV leader Jim Allister also called for action from the DUP on the issue and said they "need to pull out of their partnership with Sinn Féin/IRA".
Police are continuing to investigate the shooting, which was initially said to be paramilitary style.
The PSNI later said that they were no longer treating it as a paramilitary attack, but that position has changed again since Kelly's release.
The incident is being treated once again as a suspected paramilitary style shooting, based on the information currently available to police.
Ulster Unionist Justice spokesperson Tom Elliott said: "I am certainly very curious as to why the police would initially say that the shooting was "paramilitary style", then reclassify it as not linked to paramilitaries once it was made known that Sean Kelly was being questioned, and then to change their story again after his release."
Officers still want to hear from anyone who saw or heard anything suspicious, particularly regarding the movements of vehicles, around the Flax Centre off Ardoyne Avenue from 8-9pm on Tuesday.
The victim of the gun attack was critically ill in intensive care, but has since been stabilised. He remains in the Royal Victoria Hospital.
Kelly was convicted over the Shankill bomb after being found under the rubble with serious injuries.
Nine civilians, including two children, were killed in the blast at a fishmonger's on the Shankill Road.
IRA man Thomas Begley was also killed when the bomb exploded prematurely.