The Chinese winner would have gone on to the Worldwide Mr Gay contest
A Chinese gay pageant, said to be the first held in the country, was ordered by police to close an hour before opening, organisers say.
The Mr Gay China event was thought to mark a new openness toward the gay community in China.
Organisers said police informed them it could not go ahead because they had not applied "according to the procedures".
Homosexuality was illegal in China until 1997, and officials described it as a mental illness until 2001.
The event's organiser, Ben Zhang, said he had been hoping the event would mark another step towards greater awareness of gay people in China.
One of the judges, Weng Xiaogang, told the AFP news agency: "In my opinion, I believe it [the cancellation] had something to do with the issue of homosexuality."
The eight contestants were competing for the right to represent China at the Worldwide Mr Gay pageant next month in Norway.
The whole world was thinking China was doing a very good thing. But now I think everybody will be disappointed.
Mr Gay China contestant
The event, in an upmarket Beijing nightclub, would have included a fashion show and question-and-answer sessions with the contestants.
Some 150 people who turned up to watch, many of them from media organisations, were left to view a deserted stage.
Contestant Jiang Bo, 29, told Reuters: "It's a disaster. I'm full of disappointment. I thought the government was becoming more and more tolerant.
"They were making a big step. The whole world was thinking China was doing a very good thing. But now I think everybody will be disappointed."
In June last year, the organisers of China's first Gay Pride Festival were told to cancel two of their sessions - and that they would face "severe consequences" if they went ahead.