Soldier F, who is believed to be in his 60s, will face prosecution for the murders of Jim Wray, 22, and William McKinney, 27, and the attempted murders of Joseph Friel, Michael Quinn, Joe Mahon and Patrick O'Donnell.
There was insufficient evidence to provide a reasonable prospect of conviction for the other 16 former soldiers, the Public Prosecution Service said.
13 demonstrators were killed in Londonderry on what became known as Bloody Sunday - the 30th of January 1972.
The soldier is also facing four counts of attempted murder.
Director of Public Prosecutions for Northern Ireland, Stephen Herron said he was conscious relatives faced an "extremely hard day", but "much of the material which was available for consideration by the Inquiry is not admissible in criminal proceedings, due to strict rules of evidence that apply", he said.
"The Bloody Sunday families are not finished yet", he said. Twelve years later, his inquiry found that none of the victims had posed any threat to the soldiers, who had "lost control" and fired without warning.
But despite what had clearly for many had been an emotional and disappointing result, there was also solidarity within the families who received more hopeful news.
"Their victory is our victory", he said.
Family members have spent years campaigning for justice for the Bloody Sunday victims, while many supporters of the British military argued that the soldiers shouldn't be prosecuted for making split-second decisions decades after the event.
On 30 January 1972, civil rights protesters marched against internment without trial.
Workers on Sanders' 2020 White House campaign join union
Sanders also ran for the presidency in 2016, gathering considerable support, but lost to eventual Democratic nominee Hillary Clinton.
"In these circumstances, the evidential test for prosecution is not met", Herron said.
"We will show people that we will not tolerate one of ours being prosecuted when 300 convicted killers were released from jail and 150 "on the run" letters were handed out to those who weren't apprehended".
He said: "We are indebted to those soldiers who served with courage and distinction to bring peace to Northern Ireland".
British Defense Secretary Gavin Williamson promised that the United Kingdom government would pay for Soldier F's legal support.
"The welfare of our former service personnel is of the utmost importance and we will offer full legal and pastoral support to anyone affected by today's decision".
The Provisional IRA later broke away from the Official IRA and began a bloody campaign of bombings and assassinations of off-duty police officers and soldiers which only ended in 1994.
Mr Mercer also tweeted that the Bloody Sunday charges brought against Soldier F were the result of "an abject failure to govern and legislate, on our watch as a Conservative administration". This includes funding all his legal costs and providing welfare support. We have cried out for them for many years, and now we have succeeded for them.
He said the the Ministry of Defence is working "to drive through a new package of safeguards to ensure our armed forces are not unfairly treated".
"The Government will urgently reform the system for dealing with legacy issues".
Lawyers for the family of William Nash also contacted the Northern Ireland Attorney General John Larkin over comments made by British defence Secretary Gavin Williamson after he said he was saddened that protection against "spurious prosecutions" was not given in time for yesterday's PPS announcement.
The Police Service of Northern Ireland reopened the investigation in 2015 and prosecutors weighed up 125,000 pages of material about the controversial incident.
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