The €200 million design by renowned architect Norman Foster was to house the rock band’s egg-shaped recording studio at its peak.
But Dublin Docklands Authority said it was suspending the massive project for a year because of the crumbling property and financial markets.
The authority insisted it was committed to rolling out the ambitious development, which will soar 120m above the capital.
A statement read: “The objective is to see this landmark project completed.
“However, given the current unfavourable economic environment, more time is needed at this juncture.
“The Docklands Authority will review all of its options on an ongoing basis,” it said.
A consortium including the U2 band members and property developers Ballymore, headed up by tycoon Sean Mulryan, had been in talks with the Docklands Authority over the massive scheme for the last year.
Mr Foster, whose notable projects include the Gherkin in London and the Millau Viaduct in France, was chosen as the design winner in 2007.
As well as the band’s recording studio, the iconic building would have included a public viewing platform at 100m.
There was also to be a public amenity area at the base, hotel, retail and residential accommodation, including a fifth for social and affordable housing, according to the plans.
The Docklands Authority said it was suspending negotiations for up to 12 months to allow for the property and financial markets to improve.
“The Docklands Authority continues to have full confidence in this landmark project for an inspirational U2 Tower building, which is an important element in the master plan for the area,” it said.
“The authority is confident that these economic uncertainties are short to medium term and that the Docklands will continue to be a vibrant and positive regeneration project for the city of Dublin.”