"The decision to cancel has not been taken lightly and all options including postponement and delaying the decision have been considered in detail," said Minister for Enterprise Laurence Skelly in a statement.
"Representatives from the Isle of Man Government will now discuss the implications with all relevant businesses, stakeholders and individuals affected by this cancellation, which it recognises will be significant.
"The decision also aims to provide reassurance for our residents and healthcare professionals that the health and well-being of the Isle of Man’s residents is the single biggest priority and focus of this Government."
The races were last cancelled in 2001 to prevent an outbreak of foot and mouth disease spreading from Britain.
The event attracts tens of thousands of visitors from all over Europe and contributes significantly to the local Manx economy. (Reporting by Alan Baldwin, editing by Stephen Coates)