French energy company Engie Green had planned to erect turbines on the grounds of the former Bullecourt killing fields in northern France, where some 10,000 Australians were killed or wounded in 1917.
Many bodies were never found, and the planned site for the wind farm is a natural burial ground near the Bullecourt memorial that is visited regularly by Australian families.
"This is wonderful news for every Australian and especially those with a family connection to the Battle of Bullecourt," Veterans' Affairs Minister Dan Tehan said in a statement.
"The Engie group has listened to the concerns of the Australian people and they have acted with empathy by cancelling this project."
Tehan told Sky News he was also grateful for the efforts of the French government, saying it showed "how the French still, 100 years on, take so importantly what Australians were prepared to do for them".
"From the local mayor right through to the minister for veterans' affairs, they all referred to the diggers and the legacy of the diggers ... it's very touching for all Australians."
Engie said the project was axed as the company was "sensitive to the emotion aroused in Australia and anxious to alleviate the fears" of everyone involved in preserving the memory of the fallen.
"The recent reactions have highlighted the symbolic nature and sacredness of the site," the company said in a statement to French news agency AFP.
"Respectful of the memory of Australian soldiers who made the ultimate sacrifice on French soil during the First World War, Engie has taken the decision to cancel this project," it said.
Sky News Australia earlier this month reported that the proposal involved digging for foundations and would include transmission tunnels, other earthworks and infrastructure.
The area was the scene of some of the heaviest Australian losses in the war during a battle that has become symbolic of the incompetence of British generals directing the campaign.