About 300 Cubs, Scouts and Venture Scouts from Hove and Portslade were expected to march from St Andrew's School to All Saints' Church, Hove, on Sunday, April 25.
But a spokesman for Sussex Police said: "Based on national guidelines, our policy is not to police marches in the road where the council hasn't closed the road.
"This follows an incident in Birmingham in 1978 when a police officer directed Girl Guides across the road but one died and five were seriously injured by a car.
"If we police marches in the road, we are liable for any accidents. These have been the national guidelines for a while.
"The previous divisional commander, David Ashley, was quite traditional and supported the Scout march as the only exception to the rule. But the current divisional commander, Kit Bentham, is not prepared to police it."
Robert Cheesman, county commissioner for East Sussex Scouts, said: "The advice from the police was that if we went ahead it would be at our own risk.
"We would have put ourselves in a very difficult position with our insurers."
Mr Cheesman said it was too late and possibly too costly to arrange a road closure and steward the event.
The St George's Day service at All Saints' has also been called off because parents would have dropped children off, creating a traffic hazard.
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