The package of works was designed to protect the dunes of west sands.
Plans to protect ecologically sensitive sand dunes have been put in jeopardy after a main funder withdrew support.
The major project on the west sands in St Andrews was to have cost more than £1m, with Scottish Enterprise providing much of the money.
But Scottish Enterprise said it had decided to withdraw its funding after a review of its priorities.
The area earmarked for upgrading work is classed as a site of special scientific interest.
Plans included re-routing an existing road away from the sands to avoid erosion from cars and pedestrians.
The track is a main access route for golfers, but supporters of the project said it was little more than a track.
The dunes are heavily used for the Open Golf Championship, and the upgrading work was to be carried out when the competition was not taking place.
Scottish Enterprise informed Fife Council, the St Andrews Links Trust and the Royal and Ancient Golf Club of its decision in a letter.
The organisation has recently been restructured, with a move away from small local bodies to regionalised ones.
A spokesperson from Scottish Enterprise said: "In line with the Scottish Government's review of Scottish Enterprise's activities, our budget allocation for business infrastructure is less than it has been historically.
"Our priority for this year is to meet existing legal commitments and therefore in this context we do not have the resources to make a contribution to the proposed West Sands project."
But politicians in Fife are hoping the organisation will have a rethink.
Chairman of the north-east Fife area committee of Fife Council, Councillor Andrew Arbuckle, told the BBC Scotland News website: "I would hope that Scottish Enterprise would reconsider this view because I do not believe in people going back on their word.
"I hope they realise how high profile the Open Golf Championship is. I do not think it will do Fife or Scotland any credit."
If Scottish Enterprise do not reconsider their decision, it is hoped that alternative funding can be found to allow the project to go ahead.
North East Fife MSP Iain Smith said ministers were warned in the autumn that, if they persisted with plans for the restructuring of Scottish Enterprise, the interests of areas like his own constituency would become peripheral to those of the larger cities.
He said: "Tourism is a key part of the economy in St Andrews and the west sands project is essential to securing the future of the industry."
Mr Smith said he had tabled a motion in the Scottish Parliament and written to Finance Secretary John Swinney calling for him to intervene with Scottish Enterprise to ensure the project goes ahead.