The taxi driver was arrested on December 19 last year after a video emerged online in which the man appeared to threaten Muslim converts to Christianity.
The 41-year-old hackney carriage driver was later arrested on suspicion of religiously-aggravated harassment, but was released without charge pending further investigation.
Following an extensive six-month investigation, it has been revealed that the case has been referred to the Crown Prosecution Service (CPS).
Lancashire Police confirmed that it has concluded its investigation and has sought legal advice from a senior CPS lawyer who specialises in hate crime.
The force is now awaiting a response from the CPS before it decides how to proceed with the case.
A spokesman for Lancashire Police said: "We are now awaiting legal advice from a senior Crown Prosecution Service lawyer who specialises in Hate Crimes.
“Once that advice is received, a decision will be made on how to proceed with this case.”
Police were first alerted to the incident, recorded in the Moor Park area, by a woman who said she had been offended by "extremist views" expressed in the video.
The video soon went viral and Lancashire Police received further complaints from concerned members of the public.
Prior to his arrest, more than 2,000 people signed a petition calling for his licence to be permanently revoked by Preston City Council.
The taxi driver has since apologised for his comments and surrendered his taxi driver’s licence.
A spokesman for Preston City Council said: "We have not received a request from the driver for his licence/badge to be returned.
"The review of his hackney carriage driver’s licence was adjourned by the Taxi and Miscellaneous Committee pending the completion of the Police investigation and any legal proceedings that may follow.
"Once completed then the Committee will meet again to continue with the review of the licence."