The event has previously taken place in Dalton Square, with the Queen Victoria Statue as its centrepiece.
Other major Lancaster events including Highest Point in Williamson Park and the city-wide Lancaster Music Festival which attract tens of thousands of people to the city have also been cancelled this year due to the pandemic.
Lancaster On Ice organisers said that around 90,000 people visited the event last year, which ran throughout November and December.
The ice rink based event also included a 35m big wheel, a tipi bar and Christmas Market stalls.
Organisers for Lancaster On Ice said: "It is with extremely heavy hearts that we are announcing that Lancaster On Ice will not take place in 2020.
"Unfortunately this also includes the Tipi, The Big Wheel and the Christmas Market stalls.
"The safety and security of the city we love means it is not appropriate to have such a large scale event in such uncertain times.
"We are truly devastated as we have invested so heavily emotionally, physically and financially into this amazing seasonal experience but we hope that next year things will have settled down and we will be back bigger than ever.
"The Giving Tree which was an amazing addition last year will take place at the Borough in 2020.
"Until then stay safe and keep smiling."
Councillor Jean Parr, Lancaster City Council's Cabinet member for arts, culture, tourism and leisure, said: “Whilst we appreciate that the decision made by the organisers to cancel this year’s Lancaster on Ice event will be disappointing for many, I am sure everyone will understand that the health and wellbeing of our communities must come first.
"We look forward to working with the Lancaster on Ice team and discussing with them their plans to bring back this magical winter wonderland to the city’s Dalton Square in 2021.”