Two Republican senators said they opposed their party’s proposed alternative, making it impossible for the bill to pass in its current form.
The party has been divided on the issue, with moderates concerned about the effects on the most vulnerable, the BBC reports.
President Trump has now called for repeal of Obamacare, so Republicans can start “from a clean slate.”
That task falls to Senate Majority Leader, Mitch McConnell.
“Regretfully, it is now apparent that the effort to repeal and immediately replace the failure of Obamacare will not be successful,” Mr. McConnell said.
President Trump had made repealing and replacing Obamacare, under which more than 20 million people gained healthcare coverage, a key campaign pledge.
Republicans view the 2010 legislation as an overreach of the federal government and said patients have less choice and higher premiums.
The party’s proposed alternative had kept key Obamacare taxes on the wealthy, while imposing sharp cuts to healthcare for the poor and allowing insurers to offer less coverage.