The ICC shelved the proposal after opposition from India and other full members at a two-day meeting at the world governing body's headquarters.
The proposal had the top seven ICC-ranked test sides competing in the first tier and the remaining three full members in a pool with Afghanistan and Ireland, the leading two teams among the ICC's associate members.
The scheme was intended to provide more context to bilateral test series and allow the associate nations a chance to compete in the five-day format which is struggling to stave off dwindling popularity across the globe.
"It is off the table," BCCI president Anurag Thakur told Reuters on Thursday.
"This should have been shot down at the proposal stage itself as it is not in the interest of all nations."
The BCCI, richest among the ICC's member boards, believed the division would be financially detrimental to the lower-ranked test sides and might not be the right answer to the longest format's falling television viewership.
Thakur, 41, said India had been supported by the boards of Sri Lanka, Bangladesh and Zimbabwe in shooting down the proposal at the ICC meeting which concluded on Wednesday.
"West Indies also didn't want the two-tier system while we were confident we could convince top-ranked Pakistan in supporting us," Thakur, a member of parliament representing India's ruling Bharatiya Janata Party, said by phone.
The ICC said its members had made progress on how to take all three of cricket's formats forward and popularise the game but provided no details.
"There are some complexities, not least because of scheduling and existing structures, but we envisage the changes being implemented for 2019," ICC CEO David Richardson said in a statement.
"Members will now revert to their boards to share the details of the proposed revised structures and principles."
Australia's cricket board had expressed its support for the two-tier proposal to provide context to test cricket, among a number of other full members.
Cricket Australia (CA) declined to comment on its rejection directly but said it welcomed "progress" at the ICC meeting.
"The workshop provided a forum for all views to be heard and discussed -- and for members to work together to build an improved model for bilateral cricket played between nations," CA CEO James Sutherland said in a statement.
"We are confident that the additional structure and context proposed for each of the three formats will significantly enhance cricket's offering to fans across the globe."
(Editing by Ian Ransom)
