The Transport Minister Paschal Donohoe says the Dart Underground project is being shelved, because the tunnel needs to be redesigned.
Mr Donohoe has confirmed that the plan will not form part of the Government's five-year capital plan due next week.
He says the current design of the tunnel will not meet Dublin's needs, so it needs redesigning, even though the taxpayer has already spent €40m preparing it.
He said: "Were it to go ahead as it is currently designed, it would be the most expensive thing our country has ever done.
"And from spending much time reviewing the business case, which will be published today, I am not confident that spending €3bn on the tunnel as currently designed would have represented best value for the taxpayers or that the tunnel could have best met transport needs that are going to be there."