The Islamic Solidarity Games, due to be held in Iran in April, have been called off because of a dispute with Arab countries over what to call the Gulf.
The games federation in Saudi Arabia said the Iranian organisers had failed to address its concerns, particularly about the planned logo and medals.
These bear the words "Persian Gulf", but Arab countries, who call it the Arabian Gulf, reject the term.
The games had been postponed in October in the hope of striking a deal.
The Islamic Solidarity Sports Federation (ISSF) in Riyadh said, after an emergency board meeting, Iran's local organising committee "unilaterally took some decisions without asking the federation by writing some slogans on the medals and pamphlets of the games".
Iran "did not abide by the rules of the Islamic Solidarity Sports Federation" and "did not follow the decisions taken by the general assembly of the federation at a previous meeting in Riyadh", it said in a statement.
But Iran's committee for the games disputed the decision.
"In spite of convincing arguments made to the ISSF executive committee, regrettably and without presenting any logical reasons, the ISSF committee decided not to hold the games with Iran as the host," it said.
The games - which are meant to strengthen ties among Islamic countries - were first held in the Saudi city of Jeddah in 2005.
Iran has campaigned to ensure the body of water between Iran and the Arabian peninsula is known as the Persian, not the Arabian, Gulf.