Jim Chu said Thursday that when officers found the man with the help of a witness, they realized he has a serious mental disorder and drug addiction.
Chu said the man has signed an apology note, which was written by a police officer.
"I am sorry for what I did that day at the monument," it said. "I didn't want to hurt anyone."
The man is known to police, and Chu said he likely did not recognize the significance of the memorial that was erected in Vancouver's Coal Harbour in 2012.
It commemorates a dark chapter in Canadian history in 1914, when immigration officials refused to allow hundreds of Sikhs off the Kamagatu Maru. When the Japanese ship was forced to return to India, a riot broke out and 19 people were killed by police.
"This suspect needs the health system, not the justice system," Chu told a news conference.
"We believe that it is not in anyone's interest to serve this suspect a bylaw ticket. We explained this to several South Asian community leaders last night and they supported this decision."
The police department's Hate Crime Unit began investigating the incident in December after a photo of a man urinating on the Komagata Maru memorial had surfaced on the Internet.
Earlier this week, Vancouver police announced that they had identified and interviewed the suspect involved with the urinating incident, and that a bylaw ticket was not appropriate.
They also said that while urinating in a public place can be a criminal offence in Canada under certain circumstances, that wasn't the case here.
Vancouver Mayor Gregor Robertson said he supports the department's decision.
"The desecration and vandalism of the Komagata Maru monument was a disgusting and disgraceful act, but clearly performed by someone who had no idea what he was doing," Robertson said.
Sohan Deol, president of the Khalsa Diwan Society, said the local Sikh community was initially very upset about the incident. But they accept the man's apology and support police.
"Whatever he did, he apologized for," Deol said. "I think the community ... we should accept that (because of) the condition of that person."
Chu said the man, who lives in Vancouver's impoverished Downtown Eastside, will be referred to an outreach team that can help him with his mental illness.