The Southside Festival was due to take place over the weekend of May 24 and 25.
But organisers announced the plug had been pulled on the popular event due to a shortage of cash, along with the impact of the poor weather last year.
The Queen's Park-based festival is run by a small pool of volunteers.
Festival chairman Andrew Montgomery, from Shawlands, said: "This year we came close to having to pay for parts of the festival out of our own pocket.
"It is not a profitable festival. Every penny goes into the festival."
Typically, the event receives about £20,000 in council funding.
Mr Montgomery, 44, said there was no surplus money to carry forward from last year's event because it was poorly attended due to heavy rain.
However, in 2012 the festival attracted about 30,000 visitors.
Mr Montgomery said the volunteers felt the council kept "moving the goalposts".
He added: "We tried to discuss tying the festival in with the Commonwealth Games, but we did not get the funding to support that."
Alan Redmond, a volunteer for the Southside Fringe, which worked with the festival, said: "I played bass guitar at the festival in the last two years so it is a real shame it is not happening this year."
Despite this it is hoped the festival will return in 2015.
Mr Montgomery said: "We desperately want to try and find a way to find funding and bring it back next year."
A spokesman from Glasgow City Council said: "The council is always supportive of responsibly run community events."