The IAAF is in turmoil following widespread allegations of corruption and bribery.
"This decision was taken in light of negative publicity associated with allegations of corruption and doping in sport made against the IAAF," Nestle said in a statement.
"We believe this could negatively impact our reputation and image and will therefore terminate our existing agreement with the IAAF, established in 2012."
News that makes sense
Your trusted source for staying up-to-date with the world around you. Get free daily news updates and analysis, straight to your inbox.
Nestle had a partnership with the IAAF Kids Athletics programme.
"The IAAF is in discussion with Nestle concerning the final year of its five-year partnership with IAAF Kids’ Athletics," the IAAF said in a statement.
"This has been a successful programme with 15 million kids aged 7 to 12 years in 76 countries taking part in fun team activities which promotes a healthy, active life style."
An independent commission of the World Anti-Doping Agency has stated in a report that "corruption was embedded" at the organisation.
The report said that a clique run by former IAAF president Lamine Diack covered up organised doping and blackmailed athletes while senior officials looked the other way.
Diack is under formal investigation in France on suspicion of corruption and money-laundering linked to concealing positive drug tests, in concert with Russian officials.
Sebastian Coe, the British former 1,500 metres Olympic champion, took over as IAAF President last year with the aim of cleaning up the organisation, but the loss of the Nestle partnership is another major blow.
“Angered and dismayed by today’s kids’ athletics announcement. We will not accept it. It’s the kids who will suffer,” Coe said.
German sportswear company Adidas AG will also end its sponsorship deal with the IAAF almost four years early, the BBC reported last month.
(Reporting by Joshua Franklin and Ed Osmond,; Editing by Dominic Evans, Larry King)
