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Sirius Black manipulated Snape into going near Remus Lupin when was transformed into a werewolf at the Shrieking Shack. James Potter pulled him back at the last moment.

"Snape glimpsed me, though, at the end of the tunnel. He was forbidden by Dumbledore to tell anybody, but from that time on he knew what I was…" -Remus Lupin in Prisoner of Azkaban

Snape could have been killed or bitten, and Remus' secret was compromised. The above quote confirms that Dumbledore was aware of the incident, and Snape was sworn to secrecy.

Was this not worthy of expulsion?

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    I would wager a guess that the REASON for him being expelled would eventually come out, and reveal the questionable (to the Wizarding World at large) decision to have a Werewolf student.
    – K-H-W
    Commented Apr 29, 2018 at 17:05
  • 4
    Since when was putting a student in danger grounds for removal from Hogwarts? I mean, in Harry's second year, one of the teachers literally removed all the bones from his arm!
    – Salmononius2
    Commented Apr 30, 2018 at 15:02
  • @Salmononius2 Yet, that was reversible, so less dangerous by wizard standards... But being eaten and being turned into a werewolf are irreversible.. That's my take on it.
    – Simpleton
    Commented Apr 30, 2018 at 15:06
  • @Salmononius2 But it was incompetence, not malice.
    – Acccumulation
    Commented Apr 30, 2018 at 18:06

3 Answers 3

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They were trying to cover up the incident - expelling Sirius would have dragged it into the light.

For all that Sirius was a bit of a white sheep he's still a member of the Blacks. They would want to know why their eldest son had been expelled from the only wizard school in Britain. This is awkward for Dumbledore, since explaining that Sirius tried to feed Snape to a werewolf requires explaining the presence of the werewolf.

The Blacks are exactly the sort of family who would fight the expulsion to their last breath, dragging everyone involved through the mud. Dumbledore knew this, and knew that a thin excuse wouldn't be enough.

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    I voted up this answer, but Sirius's mother was always depicted as barking mad (especially in ... and the Order of the Phoenix), so it really isn't very likely she would care one way or the other if Sirius got himself expelled. Given Snape's antipathy toward Sirius, the more interesting question is why he agreed to keep the incident a secret, and whether he had to be enchanted with a memory charm!
    – Ed999
    Commented Apr 30, 2018 at 6:59
  • Whereas Sirius was merely barking.
    – msouth
    Commented May 28, 2019 at 16:19
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The PR problem

As Arcanist Lupus pointed out, it might not have been a good thing for Hogwarts' image to host a werewolf. There were already a lot of complications to begin with, as Lupin explained.

"But then Dumbledore became Headmaster, and he was sympathetic. He said that as long as we took certain precautions, there was no reason I shouldn't come to school..." Lupin sighed, and looked directly at Harry. "I told you, months ago, that the Whomping Willow was planted the year I came to Hogwarts. The truth is that it was planted because I came to Hogwarts."

Harry Potter and the prisoner of Azkaban, chapter 18, "Moony, Wormtail, Padfoot, and Prongs"

The "human" problem

Dumbledore is depicted as quite caring, and would be - I think - the kind of guy to give second chances on the basis that even if the joke was stupid and deadly, Sirius was still a kid at that point. And as Hitwizard highlighted, he wouldn't want him to become bitter and fall into the dark side. There's a quote about preserving Draco's soul which would indicate that Dumbledore thinks that way.

"That boy’s soul is not yet so damaged," said Dumbledore. "I would not have it ripped apart on my account."

Harry Potter and the Deathly Hallows, chapter 33, "The Prince's Tale"

But the last thing which could be considered (at not the least), is Lupin himself. Dumbledore moved heaven and earth to give Lupin the most normal life possible despite his "furry problem". Expelling Sirius would not only deprive Lupin of 33% of his friends, but might make Lupin feel guilty, even if it wasn't his fault. Lupin already felt guilt for not stepping up to James and Sirius bullying Snape.

Remus functioned as the conscience of this group, but it was an occasionally faulty conscience. He did not approve of their relentless bullying of Severus Snape, but he loved James and Sirius so much, and was so grateful for their acceptance, that he did not always stand up to them as much as he knew he should.

Source : Lupin's page on Pottermore

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    Also, if he'd expelled Sirius (for telling Snape how to break the rules, thereby putting him in danger) he'd have had to expel Snape too, seeing as it was his choice to go ahead and actually break the rules. And of course Lupin would have wound up being expelled too once it became public knowledge that he was a werewolf.
    – Harry Johnston
    Commented Apr 29, 2018 at 19:44
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Sirius came from the Black family, which was known for Dark Arts;yet he was a Gryffindor, and not taken in by blood purity; so Dumbledore could have hesitated to expel him, as expulsion might force him into his family's dark ways.

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