In a statement, the bank said it was cancelling its $1.2bn (£764m) credit for the 6km-long (four miles) the road-rail bridge across the Padma River.
It accused the government in Dhaka of failing to investigate claims of high-level fraud in connection with the project.
Bangladesh has so far not commented on the World Bank’s decision.
“The World Bank cannot, should not, and will not turn a blind eye to evidence of corruption,” the Washington-based institution said in the statement on Friday.
It said that the bank had provided evidence of corruption from two investigations to Bangladesh’s government last September, asking to suspend officials suspected of corruption.
It also said it had sent a high-level team to Dhaka to fully explain its position on the issue
But Dhaka’s response, the statement added, “has been unsatisfactory”.
The Padma bridge project aims to connect Bangladesh’s principal sea ports and link to the Dhaka-Chittagong Highway.
Analysts say that some 30 million people in the region could directly benefit from the new road and rail connection.
At present all traffic across the Padma has to rely on ferries, which are infrequent and often unsafe.