Environmentalists have warned that the dam would flood an area in Kachin province about the size of Singapore, submerging dozens of villages and displacing at least 10,000 people. The region is one of the world’s most biodiverse.
In a message to parliament on Friday, President Thein Sein said the government had to respect the will of the people.
“We have a responsibility to solve the worries of the people so we will stop construction of the Myitsone Dam during our current government,” he said.
Resistance to the dam has been building over the past few weeks with pro-democracy leader Aung San Suu Kyi among those who have urged the authorities to review the project which is backed by energy giant, China Power Investment Corp.
The dissident welcomed the suspension.
The dam, which was due for completion in 2019, would be one of the world's tallest at 152 metres high and would provide electricity for neighbouring China.
The Burma Rivers Network, a network of groups representing dam-affected communities also called for six other mega dams planned on the Irrawaddy’s tributaries to be scrapped.