Innogy Renewables UK Ltd had been proposing a hydroelectric scheme on the River Conwy, near Betws y Coed in Snowdonia National Park.
But on Wednesday it said it had decided to shelve the Conwy Falls project.
The application had been due to be considered by Conwy council planning committee next week.
Innogy Renewables UK said the decision to withdraw the application was made following a late request for additional information.
It said that Natural Resources Wales' river basin management plan for western Wales had been updated last December, including a change to the sensitivity of salmon fisheries, following which further information had been requested.
The project, providing power to 3,200 households, attracted opposition from environmentalists, anglers, canoeists and businesses.
The firm has previously said it would have had a positive impact on the environment but campaigners were worried half an acre of the centuries-old Fairy Glen Wood would be destroyed by the build.
In March, the park's authority turned the plans down, asking for clarification on "minor issues".
Innogy Renewables UK Ltd said it would now consider its next steps.
Conservation charity the Snowdonia Society said it was "relieved that the immediate threat to the wonderful Conwy Falls and Fairy Glen has passed, but concerned that it could resurface yet again".

The result means the Senegalese join Zambia as the only African sides in the round of 16.
South Africa and Guinea are already on their way home after being eliminated from the tournament.
Senegal put the ball in the back of the net after 54 minutes but the video assistant referee ruled that Aliou Badji's effort was illegal as the forward had fouled Ecuador goalkeeper Jose Cevallos.
Senegal finished the match with 10 men after Cavin Diagne was sent off following a second bookable offence.
The share of the points in Jeonju means that Senegal finish as Group F runners-up to the United States who drew 1-1 with Saudi Arabia in the group's other match.
Next up for Senegal is Mexico while Zambia will face Germany.

Kent closed on 288-5, a lead of 437, opting not to set Essex a target.
Essex earlier were bowled out for 292, avoiding the follow-on by one run.
Kent were reduced to 40-4 but Northeast shared an unbroken 185 with Will Gidman (63 not out) as runners-up Kent batted through the remainder of the day.
The hosts had already secured the six points that guaranteed second place, a promotion spot in any other season.
In reality, the prospects of a result were slim as soon as David Masters and Matt Dixon scored the three runs Essex needed to avoid the follow-on, with Dixon then out from the very next ball.
Even when Kent slipped to 40-4 and 103-5, it never seemed likely that Essex would be able to force victory without the aid of a declaration.
Northeast, an immovable figure, ensured as much, the only excitement coming when he took 30 off one Kishen Velani over - three fours and three sixes.
The final over was bowled by retiring Essex seamer David Masters, the 38-year-old ending his first-class career with 672 wickets from 202 matches.
He was given a guard of honour that included England Test captain Alastair Cook as he left the field.

Silcox Coaches is a private coach hire and tour operator with bases in Pembroke Dock and Tenby, and has a contract with Pembrokeshire council to provide school transport.
Letters have been sent home to staff this week explaining the situation and that a buyer is being sought.
Silcox has been asked for a comment.
It is understood customers enquiring about trips they have booked have been told the company has taken this action in order to protect the business as it seeks a new owner.
The company was founded in 1882 and has run bus services around Pembrokeshire since 1932.  It is also one of the main suppliers for local sport teams.
Pembrokeshire council said it was waiting to hear how a potential sale of Silcox would affect school transport.
A council spokesman said: "We are aware of the possible restructuring of the company and we will work with all interested parties.
"We anticipate a clearer picture of the situation emerging next week."
He added: "At this time, Silcox continues to operate and the council will continue to pay the company for the work it is carrying out in accordance with our contractual obligations."
Controversial plans for a £12m renewable energy project at a Conwy county waterfall beauty spot have been withdrawn.
[NEXT_CONCEPT]
Senegal are through to the second round of the Under-20 World Cup in South Korea after a goalless draw with Ecuador.
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Sam Northeast made 178 not out as his Kent side batted out a tame draw against County Championship Division Two champions Essex on the final day of the season at Canterbury.
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About 100 jobs could be at risk at a Pembrokeshire coach company which intends to file for administration, BBC Wales understands.