House Speaker Paul Ryan said he and Mr Trump agreed to pull the vote, after it became apparent it would not get the minimum of 215 Republican votes needed.
The last minute move was seen as a huge blow to Mr Trump.
Repealing and replacing the programme known as Obamacare was one of his major election pledges.
Earlier on Friday, White House press secretary Sean Spicer said that the vote would go ahead at 15:30 (19:30 GMT).
Mr Trump had reportedly warned Republicans that if they did not vote for his bill then they would be stuck with Barack Obama's healthcare programme for good.
However, multiple reports suggested that between 28 and 35 Republicans were opposed to his draft American Health Care Act.
The vote was withdrawn shortly after 15:30, and the House is now in recess.
Republicans currently have a majority in both the House and the Senate.
However, some Republicans were unhappy that the bill cut health coverage too severely, while others felt the changes did not go far enough.
The bill also appeared unpopular with the public - in one recent poll, just 17% approved of it.
Speaking after the withdrawal, Mr Trump blamed the Democrats for not supporting the bill and predicted that Obamacare would "explode".
He said the Republicans would probably focus on tax reform for now.
"We have to let Obamacare go its own way for a little while," he said, adding that if the Democrats were "civilised and came together" the two parties could work out a "great healthcare bill".
How bad was Friday's defeat of the American Health Care Act in the House of Representatives? Bad. Very bad.
The American Health Care Act was the first major piece of legislation pushed by the White House and the Republican-controlled Congress, a key political test early in the president's term, when he should be at the height of his power and party cohesion at its strongest.
In spite of all of this, Mr Trump, House Speaker Paul Ryan and the Republicans running Washington could not get the job done.
For Republicans Friday wasn't just bad. It was a disaster.
Read more analysis here.
Earlier, Mr Ryan told reporters: "We are going to be living with Obamacare for the foreseeable future.
"I will not sugar coat this. This is a disappointing day for us. Doing big things is hard."
"We were a 10-year opposition party where being against things was easy to do," he said, adding that it was difficult to get "people to agree with each other in how we do things".
Meanwhile, Democrat and House minority leader Nancy Pelosi described it as "a victory for the American people".
And House Minority Whip Steny Hoyer said it was a "good day" for Americans, adding "we worked over years to assure that the American public would have access to affordable, quality healthcare".
US President Donald Trump has withdrawn his healthcare bill after it failed to gain enough support to pass in Congress.