FILE - The Terminal of Rafik Hariri International Airport, in Beirut, Lebanon, Thursday, July 13, 2006. (AP )
Lebanon "will not proceed with the contract", Public Works and Transportation Minister Ali Hamieh said on Twitter, adding that the decision came "following legal controversy".
Some had questioned how a caretaker government with limited powers could announce such a major infrastructure project, in a country where entrenched political barons are accused of systemic corruption.
Civil society organisations and lawmakers noted the absence of a tender process and a lack of involvement of the Public Procurement Authority.
Jean Ellieh, head of the authority, said "the contract did not pass through" the regulatory body as required under a 2021 law.
Last week 10 civil society groups, including Transparency International Lebanon, warned of "serious abuses" in the procurement law's application which "open the door to corruption and nepotism".
The government, which has been operating in a caretaker capacity since legislative elections last May, announced the second terminal project last week, to be carried out by private company Lebanese Air Transport and Irish firm daa International.
Hamieh had said the private sector would fund project, which would have created "around 2,500 jobs", with the firms to operate the terminal for 25 years.
Lebanon plunged into an economic crisis in 2019, that the World Bank has dubbed one of the planet's worst in modern times.
The meltdown has pushed most of the population into poverty while the political elite, widely blamed for the country's financial collapse, has failed to take action.
The International Monetary Fund last week warned the country was "at a very dangerous moment", criticising slow progress on reforms needed to unlock billions in emergency loans.
Along with a caretaker government, the country has also been without a president for almost five months amid political deadlock.