The air link between Dubai and Kabul was cut last year
Only two other countries - Pakistan and Saudi Arabia - still recognise the Taleban, who control most of Afghanistan.
A UAE foreign ministry statement quoted by the official news agency WAM said the Gulf state had taken the decision after failing to persuade the Taleban to hand over Saudi-born militant Osama Bin Laden.
The United States says Bin Laden and his associates are the main suspects in the devastating suicide attacks on Washington and New York.
Suspects
Several Saudi citizens and one Emirati have been named among the suspects for the 11 September suicide attacks on the World Trade Center and Pentagon, which left more than 6,000 people missing and presumed dead.
Saudi Arabia downgraded ties with Kabul to charge d'affaires level in
1998 in protest at the Taleban's refusal to hand over Bin Laden following attacks on US embassies in Kenya and Tanzania.
A UAE foreign ministry official said the Emirati authorities "have made intense efforts to persuade the Taleban to give a favourable answer to the (UN) Security Council request to hand over Bin Laden, so that he can be given a fair trial by an international court on the charges linked to the terrorist attacks".
The official added that the UAE "does not believe it is possible to continue to maintain diplomatic relations with a government that refuses to respond to the clear will of the international community".
The UAE has complied with UN sanctions imposed on the Taleban at the end of 2000 for failing to hand over Bin Laden.
The UAE, where some 110,000 Afghans live, halted an air link between Dubai and the Afghan capital Kabul last November as the sanctions went into effect.
The UAE, Saudi Arabia and other Gulf states have stated their readiness to "co-operate fully" with the United States in the campaign against international terrorism.
The six member states of the Gulf Co-operation Council are to meet in the Saudi capital Riyadh on Sunday and are expected to present a united front.