Benvolio explains the fight to Prince Escalus who declares that because Romeo has killed in revenge he will be banished from the city of Verona rather than sentenced to death. After a secret night with Juliet, Romeo flees to Mantua. In Romeo and Juliet, another possible reason for the Prince's reluctance to follow through on the sentence of death that he has proclaimed for anyone who disturbs the peace of the streets of Verona is that he may reason that his putting of Romeo to death may ignite more feuding and simply perpetuate the hatred between the Montague and Capulet family. For, since he knows that already three civil brawls have erupted from only "an airy word" and caused Verona's senior citizens to take out their old weapons and resume their fighting, the Prince may feel that banishment for Romeo is preferable.
In addition, being the Prince, he may have been alerted that Friar Laurence has married Romeo and Juliet; thinking that their marriage may not yet be consummated, the Prince may want to be able to force the annulment of this marriage by keeping Romeo away long enough for such an annulment. In this way, too, he can avoid more feuding.
Or, he may have only been advised that Romeo was seen at the Capulet home on the night of the masked ball for Juliet. Then, the Prince may conjecture that if he banishes Romeo, Juliet's eyes will fall upon someone else, such as Paris--who is, after all, his kinsman--and she will not become interested in a Montague, the enemy of her family. The Prince never offers us an explicit reason for only banishing Romeo and not having him put to death. However, we can infer that perhaps the Prince believed Romeo was justified in taking vengeance on Tybalt for the death of Mercutio. Mercutio was also the Prince's cousin.
Additionally, we also learn from Lord Capulet (of all people) that Romeo is known around Verona to be a fairly upstanding person with no record of violence in his past. It would make sense then, perhaps, for the Prince to spare the life of Romeo and only banish him. We are not really told why, so this is one that we have to speculate on.
In my opinion, there are a couple of possible reasons why the prince has been merciful.
The first reason is that he might have heard about Romeo's real part in the fight. He might have heard Romeo tried to break it up and only got made when Tybalt killed Mercutio unfairly and unnecessarily.
Second, I imagine that the prince does not want to make the Montagues angry if he can help it. They are powerful, and it seems to me that he might want to try to keep them happy if at all possible.
