Network Rail, Yorkshire Forward and the National Museum of Science and Industry (NMSI) said they would not be searching for a developer for the York Central site behind the city's train station until market conditions have improved.
The proposals include 3,000 homes and offices on the 35ha site, in addition to a £20 million plan to enhance the NSMI visitor attraction. The project would have created more than 9,000 jobs over the next 20 years.
Network Rail major developments head Ian Lindsay said: "We received two bids for this development but the property market remains challenging. Although York Central would have been a complex development in a strong market, the downturn has made it impossible."
Yorkshire Forward director Jan Anderson added: "The stakeholders have all worked hard to ensure this development's success. With the property market only now starting to recover, providing the scheme that York deserves is not feasible."
York City Council acting chief executive Bill Woolley said: "We will continue to work with Yorkshire Forward and the two landowners on this important site."