Police in Indonesia had refused to issue a permit for the US pop star
after Islamic groups objected to her show, claiming it was too vulgar.
The hardline Islamic Defenders Front (FPI) had threatened to try to stop Lady Gaga getting off the plane.
Indonesia is officially secular but has more Muslims than any other country.
More than 50,000 tickets had been sold for the 3 June event. Promoters said they would offer refunds.
Police had said they would only issue permits for the concert
- part of her Born This Way Ball concept tour - if the flamboyant
singer agreed to tone things down. Instead, her management pulled the
plug on the show.
Nothing holy about hatred
"Lady Gaga's management has considered the situation minute to
minute, and with threats if the concert goes ahead, Lady Gaga's side is
calling off the concert," Minola Sebayang, lawyer for promoters Big
Daddy, told reporters.
"This is not only about Lady Gaga's security, but extends to those who will be watching her."
Big Daddy President Michael Rusli said: "I think everyone
including the government itself would have hoped that the show would go
on. But of course along the way we have to review all the planning and
we have to be mindful of what is happening in the media, what is
happening in Indonesia itself."
Just hours before the announcement, Lady Gaga wrote on her Twitter account: "There is nothing holy about hatred."
The singer has nearly 25 million followers on Twitter - the highest number on the social networking site.
Lady Gaga is known for her flamboyant outfits
The Islamist FPI had threatened violence if the concert went ahead,
calling Lady Gaga a "devil's messenger" who wears only a "bra and
panties".
Habib Salim Alatas, the group's FPI Jakarta chairman, said the cancellation was "good news" for Indonesia's Muslims.
"FPI is grateful that she has decided not to come.
Indonesians will be protected from sin brought about by this Mother
Monster, the destroyer of morals," he told AFP news agency.
He added: "Lady Gaga fans, stop complaining. Repent and stop
worshipping the devil. Do you want your lives taken away by God as
infidels?"
Indonesia's conservative Religious Affairs Minister, Suryadharma Ali, also welcomed the cancellation.
"I strongly believe this cancellation will benefit the country," he said.
"Indonesians need entertainment and art which have moral values."
This is not the first time that Lady Gaga has faced objections during her Asian tour.
Her concert in South Korea in April was made an adults-only event following protests from Christian groups.
Protests also took place in the Philippines, with Christian groups accusing her of being blasphemous.
She is scheduled to play three shows in Singapore this week before moving on to New Zealand and Australia.
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