Tigerair will cease flying to and from Bali after Indonesia declined to give it leave to operate.
This means no Denpasar inbound or outbound journeys will go ahead from Friday onwards.
The dramatic decision comes after Indonesian authorities told the carrier it needed a new solution to regulatory questions over its Bali operations.
The airline said this would take at least six months and compromise its ability to offer low-cost airfares to travellers to Bali.
"As a result of this development, Tigerair Australia has made the difficult decision to withdraw from flying between Australia and Bali permanently," it said in a statement.
"We sincerely apologise to customers."
Customers booked to travel from Australia to Bali from Friday will be offered full refunds.
Tigerair customers in Bali will be re-directed to services operated by Virgin Australia or another carrier.
The airline was operating about three inbound and three outbound Australia-Bali flights each day.
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