The program had drawn criticism from groups claiming it risked fostering prejudice.
In a statement Wednesday, ABC acknowledged the delicate nature of the series in which families asked to pick a new neighbor are made to expose and overcome their biases.
"Welcome to the Neighborhood" demonstrates what happens when people are forced to "confront preconceived notions of what makes a good neighbor," the network said.
"However, the fact that true change only happens over time made the episodic nature of this series challenging, and given the sensitivity of the subject matter in early episodes we have decided not to air the series at this time."
The six-episode show, which was to debut July 10, follows three families in Austin, Texas, who are given the chance to choose a new neighbor for a house on their street.
Each family initially wants someone similar to them — white and conservative.
Instead, they must choose from families that are black, Hispanic and Asian; two gay white men who've adopted a black child; a couple covered in tattoos and piercings; a couple who met at the woman's initiation as a witch; and a poor white family.
In the early episodes, one man makes a crack about the number of children piling out of the Hispanic family's car and displays of affection between the gay men provoke disgust.
The series' producers had said it was intended to promote a healthy and open debate about prejudice and people's fear of differences.
The Gay & Lesbian Alliance Against Defamation, after viewing the series, expressed strong concerns.
While it ultimately carries a valuable message about diversity and acceptance, those watching the first episodes could be left thinking discrimination is "not that big a deal," GLAAD spokesman Damon Romine said Wednesday.
"Regardless of how things turn out at the end of the last show, it's dangerous to let intolerance and bigotry go unchallenged for weeks at a time," he said, adding that GLAAD hopes a revised version might air.
Before ABC announced its decision, the Family Research Council said it was worried evangelicals would be made to appear judgmental and foolish.