The 2027 Island Games will no longer be hosted by Ynys Môn.
The upcoming inter-insular event was due to take place but organisers in Anglesey say they have had to withdraw "due to pressures on public sector finances".
The Faroe Islands, which were due to host the 2031 games, have stepped in to take over hosting duties.
Gareth Parry chairs the committee which was organising the Ynys Môn games. He said: "We are extremely disappointed to have come to the difficult decision that we are not in a position to host the Island Games in 2027.
"The impact of the pandemic and other incidents across the world over recent years have had a devastating effect on the current financial climate in Ynys Môn and Wales. We had secured enough funding when submitting our bid prior to COVID-19 with support from the Local Authority, the Charitable Trust, and the Welsh Government, but a recent review of the budget highlighted a significant funding gap that we are unable to meet in the current financial climate."
He went on to say the committee has been working for more than seven years to get things ready for the 2027 Island Games, and while they are "extremely disappointed, the risks involved in continuing are too high".
IIGA chairman Jorgen Pettersson says Ynys Môn will be welcome to put forward another bid to host the Islands Games in the future
Jorgen Pettersson, the chairman of the International Island Games Association said: "The IIGA fully understands that the world has changed since Ynys Môn made its original bid in 2018.
"Rising costs and general cutbacks are challenging for everyone. The IIGA appreciates the openness of the Ynys Môn team and their approach to allowing the executive to seek a replacement host and providing sufficient time to achieve this.
"The IIGA looks forward to Ynys Môn coming forward with a new bid at a future date".
When the Faroe Islands were chosen to host the 2031 Island Games, organisers expressed an interest in stepping in earlier if the opportunity arose.
They won't be confirmed as the new host until next summer once an IIGA delegation has visited for an official inspection and other member islands agree.
If selected, it will be the second time the Faroe Islands have hosted the Island Games. They were the third nation to host the event back in 1989.