The decision has been taken by committee members of the County of Salop Steam Engine Society.
Edward Goddard, chairman of the society, said: “After a long discussion about the options available to us, our organising committee and section secretaries have regrettably reached the decision that in the current situation the safety of our exhibitors and visitors is of paramount importance. We feel our decision is a sensible thing to do in the circumstances.
"As the situation constantly changes we will evaluate our plans and will announce them via our website www.shrewsburysteamrally.co.uk
"The decision is particularly difficult as this year is the society’s 60th anniversary and we were really hoping to put on a celebration. We know Shropshire’s community will continue to support us – and we will see you soon.
"Finally we would like to take this opportunity to thank all our exhibitors and followers who, had we have gone ahead this year, would have undoubtedly supported our event.
"We are really looking forward to enjoying what promises to be a spectacular Shrewsbury Steam Rally in 2022."
The annual event is held on the August Bank Holiday weekend at Onslow Park, on the outskirts of Shrewsbury. Last year's rally was also cancelled.
The rally had its origins in Church Stretton, with several locally-owned steam traction engines taking part in the town's carnival parade.
In 1961 the carnival committee decided it could no longer run the event, but the steam enthusiasts decided to go it alone and set up the first steam engine rally in the town, and The County of Salop Steam Engine Society was born. In its first year there were 18 steam engines and 17 veteran cars.
In 1970 the rally moved to a larger site at Bishop's Castle, but in 1991 the society had outgrown this site as well and moved to 40 acres at Walcot Hall, Lydbury North, for three years. Problems existed in very wet weather so in 1994 the society moved to its existing site at Onslow Park.