The Stadium For Cornwall project has been dropped after Cornwall Council leader Linda Taylor announced there was no money in the budget for it.
The stadium at Langarth, outside Truro, received planning approval years ago but has remained in limbo since.
It was going to be the base for the county's main football and rugby teams, with community and conference facilities.
Only a month ago, Cornwall Council said it was one of the projects it was putting forward for the government's levelling up funding.
But today (29 June), the council says that it needs to prioritise other projects like revitalising St Austell and Helston - the stadium now is not one of them.
Martin Tucker, Chairperson of the Stadium for Cornwall CIC, and Principal of Truro and Penwith College, said: “As a result of the council’s withdrawal, the Stadium for Cornwall CIC has voted to cease co-developing the Stadium for Cornwall project in its former capacity.
"Truro and Penwith College will no longer be a key stakeholder in the project, which is a huge disappointment after 12 years of hard work from everyone involved.
“Those concerned will now move to support the future of the Langarth site as a Truro City Football Club led development.
"We remain fully supportive of their efforts to create a smaller ground facility that would still provide for rugby, football, and importantly, high levels of community use for people and organisations from across Cornwall.”
A spokesperson for Cornwall Council said: "Due to a change in the Levelling Up Fund criteria Cornwall Council has taken the decision not to submit a bid for the Stadium for Cornwall project on this occasion.
"We had understood that submissions to the 'culture' strand of LUF were additional to the 6 Parliamentary constituency bids we are able to put forward under the rules.
"However, this is not the case and we have taken the decision to focus on those constituency bids at this time."We would like to thank the stadium partners for the work they have done and will continue to work with them to identify appropriate funding opportunities in the future."
Despite receiving planning approval in 2013, issues over land ownership and funding have simmered on.
Last year it was revealed how the project might have to be scaled down from 10,000 seats to 6,000 seats over rising costs. In 2018, the project was estimated to cost £14.3 million but costs are believed to have increased since.
Originally, Cornwall Council was going to put in £3 million if it was matched by the government.
But today's announcement effectively means those final millions needed are still nowhere to be seen.