Canada is pulling out of a conference it was helping to sponsor on promoting business links with Iran.
Kazemi's remains have not been returned to her family in Canada
The move follows new allegations that Canadian journalist Zahra Kazemi was tortured and possibly raped before dying in Iranian custody in 2003.
Canadian Foreign Minister Pierre Pettigrew said on Tuesday he had asked Iran to return the remains of Ms Kazemi and open an inquiry into her death.
Iran insists she died after fainting and hitting her head.
Canada's agricultural department had been due to help sponsor and attend a "Doing Business with Iran" conference in Montreal on 13-15 April.
But the government said on Wednesday it would no longer be involved, although the conference would still go ahead.
"In light of the new details involving the Kazemi case, the government of Canada has decided not to actively participate any further," said Christine Aquino, spokeswoman for Agriculture Minister Andy Mitchell.
"There will be no government of Canada presence at this event."
The case of Ms Kazemi's death was revived last week when a former Iranian doctor who said he had treated her gave damning evidence at a news conference in Ottawa.
Shahram Azam - who has been granted refugee status after arriving in Canada - said he had seen Ms Kazemi when she was brought to hospital in Tehran, unconscious and on a stretcher.
He said that, upon examination, he found horrendous injuries ranging from a broken nose to a ruptured eardrum, lash marks and evidence of brutal sexual assault.
The Iranian government - which carried out an inquiry into the journalist's death - said the allegations were "baseless and completely false". It said no-one named Shahram Azam had ever worked in the hospital.
Ms Kazemi, a 54-year-old Iranian-born Canadian photojournalist, was arrested in June 2003 after taking photos of demonstrations outside a Tehran prison.
She died in a Tehran hospital on 10 July 2003 after falling into a coma, having received head injuries during more than three days of interrogation.