The airline also canceled more than 900 flights Thursday.
It was the latest and largest in a wave of cancellations at major U.S. airlines that have caused long lines at ticket counters and made flying even more stressful than usual.
Executives at American said safety was never compromised, and they suggested the nation's biggest airline was the victim of suddenly stepped-up scrutiny by federal regulators.
But CBS News correspondent Nancy Cordes reports that an FAA directive warns that if not tied up properly, the wires could short and cause a "fuel tank explosion and consequent loss of the airplane."
American estimated that more than 100,000 travelers were booked on Wednesday's 1,094 canceled flights. Many had to scramble to book new flights and were stranded at hotels far from home.
The airline had already scrubbed 460 flights on Tuesday after federal inspectors found problems with wiring work done two weeks ago, during the first set of shutdowns.
A top executive said the cancellations would be a "significant" cost to American, and shares of parent AMR Corp. fell 11.1 percent, down $1.15 to $9.17.
The issue stems from an order that the Federal Aviation Administration gave airlines in September 2006 and gave airlines until last month to meet about the bundling of wires in the backup power system for the fuel pump of the MD-80 airplanes. The fear is that improperly bundled wires could rub, leading to an electrical short or even fire. However, no serious incidents have been blamed on the bundles, the FAA said.
American officials thought they had fixed the problem last month. But this week, FAA inspectors found problems with the work done on more than a dozen planes. American said it had no choice but to ground all 300 of its MD-80s to deal with the wiring bundles.
American operates about 2,200 daily flights, more than one-third with MD-80s. Nearly half the cancellations were concentrated at two airports, in Dallas and Chicago.
At New York's LaGuardia Airport on Wednesday, hundreds of passengers stood in check-in lines or milled about, using cell phones to get updates on their flights. The airline offered free doughnuts, coffee and orange juice, but there were few takers.
"They should be able to predict these kinds of things," said Laura Goodman, whose flight home to Dallas was canceled. She said would miss an important meeting because the airline couldn't rebook her until Thursday.
New Yorker Michelle Soss had hoped to steal a few days in Albuquerque, N.M.
"I covered my kids' schedules, I covered my work schedule to get away for a few days," she said. "I don't know if I'm getting anywhere."
American's cancellations came after similar delays at Southwest, Delta and United. Last week, hundreds of travelers were marooned when Aloha Airlines and ATA Airlines shut down and filed for bankruptcy protection.
Alaska Airlines said Wednesday it canceled 14 flights to inspect the wiring on its nine MD-80s.
For travelers, the bad news might not end Thursday either. Daniel Garton, American's executive vice president, said cancellations could extend into Friday.
A return to normal operations depends on how quickly mechanics can inspect and fix the wire bundles. Airline spokesman Tim Wagner said late Wednesday afternoon that 60 planes had been cleared to fly, 119 were being worked on, and 121 planes had not yet been inspected.
Garton acknowledged that the bundling of wires had not met FAA standards, but he said "these were not huge errors" and posed no threat to safety. He said the agency used to give airlines "latitude" in interpreting safety regulations, but no longer.
The FAA began looking more closely at airlines' compliance with safety directives in recent weeks, after it was criticized for letting Southwest operate planes that had missed inspections for cracked fuselages.
In the past few weeks, the FAA levied a $10.2 million penalty against Southwest and conducted new inspections at all U.S. airlines, leading to flight cancellations at Southwest, Delta and United.
FAA spokeswoman Diane Spitaliere said inspectors found problems with the wiring bundles at 15 of 19 American MD-80s that it checked this week.
The 2006 safety order from the FAA directs airlines in how to pack and stow wiring to a hydraulic pump in the wheel well to prevent the wires from rubbing together.
According to the FAA, shorted wires could ignite fuel vapors and cause a fuel-tank explosion that could destroy a plane.
The explosion of TWA Flight 800 off New York's Long Island that killed all 230 people aboard in July 1996 was blamed on fuel vapors ignited by wiring. But it was a Boeing 747, not an MD-80, and investigators believe the disaster involved different wiring from the bundles now under scrutiny.
Brian Stirm, an aircraft-maintenance expert at Purdue University, said airlines had plenty of time for the inspections and that even an untrained mechanic could spot a problem.
The cancellations could hardly come at a worse time for American. Its parent, AMR Corp., is scheduled to report first-quarter earnings in two weeks, and analysts are forecasting a loss of more than $300 million. High fuel prices and the downturn in the economy are hurting the industry.
American officials said the company would give $500 travel vouchers to anyone stranded overnight. It also paid for hotel rooms and meals for an undisclosed number of passengers.
Bob McAdoo, an airline analyst, said passengers might soon forget the debacle, especially since several other major airlines have canceled flights recently. But he said passengers who missed big events like weddings might avoid American again.
Kathy Neer of Santa Fe, N.M., was caught up in both waves of cancellations to and from a vacation in Paris. She and her husband were stranded in Dallas on Tuesday on the final leg of their journey home. American gave the Neers a voucher for a hotel room and seats on another flight home Wednesday.
"They say our flight is leaving at 3:55 p.m., but do you think we trust them?" Neer said. "After being burned twice, we're a little skeptical."