Race organizer Normand Legault said he received the news in a Wednesday letter from Formula One officials. The likelihood the race would be pulled was discussed with Formula One boss Bernie Ecclestone over the weekend.
Legault said the race was removed from the circuit due to the impact of Canadian anti-tobacco legislation.
The legislation, announced in 1997, forbids tobacco advertising on cars. The Montreal race had a seven-year grace period before tobacco sponsors had to be dropped.
"It was basically made in light of the Oct. 1 application of Canada and Quebec's anti-tobacco legislation," Legault told a news conference.
"So basically what that means for next June's event is that Michael Schumacher's Ferrari could not sport Marlboro's colours and Jacques Villeneuve's car could not have Lucky Strike on it.
"Based on this situation, Mr. Ecclestone has the legal right to call an end to the contract."
The race could proceed if teams agreed to enter unbranded cars, something that would cost each team millions in potential revenue from tobacco sponsors. But the odds of this are slim since there isn't much time to negotiate a new deal before the 2004 race calendar is finalized.
"If there is a slim chance of trying to overturn that decision, we will definitely try and do it," said Legault, suggesting auto manufacturers might be lobbied to influence their teams to race unbranded in Canada.
For now, the Canadian Grand Prix is off.
The decision will have negative economic ramifications on the city, according to Legault. The June event has drawn crowds of more than 300,000 on race weekend.
"There's an important economic impact," Legault said. "There will be an important negative impact on Montreal's tourism."
Canada has been a part of the Formula One calendar since 1967, only missing two races in over 35 years. After turns at Ontario's Mosport Park and Mont Tremblant, Que., Montreal became the race's permanent home in 1978.
Local hero Gilles Villeneuve was the race's first winner in Montreal. The Ile de Notre Dame circuit was renamed in Villeneuve's honour following his death at the 1982 Belgian Grand Prix.
with files from Canadian Press