Pakistan had refused to play if the tournament was moved elsewhere
The International Cricket Council has postponed next month's Champions Trophy until October 2009.
The eight-team tournament was scheduled to take place in Pakistan from 12-28 September, but South Africa had already pulled out because of security worries.
And England, Australia and New Zealand had also expressed doubts about playing in Pakistan at the present time.
ICC president David Morgan said there was "complete support and sympathy" for the Pakistan Cricket Board.
Pakistan is currently fighting Taliban and Al-Qaeda militants in the northwestern tribal regions bordering Afghanistan and has suffered a string of deadly suicide bomb attacks in the last year, which have killed more than 1,000 people.
Last week there were two suicide bombings in the towns of Wah and Dera Ismail Khan which left 95 people dead and left dozens injured.
"There was a realisation that, under the current circumstances, some of the teams due to compete had reservations about touring there which could not be removed," said Morgan.
"In those circumstances, it was considered prudent to postpone the event to October 2009, a time when we all hope conditions will be more acceptable for all the competing teams," he continued.
The decision was taken during a teleconference involving the ICC's executive board, who also agreed that Pakistan would retain the right to host the tournament next year.
But Morgan said: "If other members continued to express reservations over issues of safety and security, then the ICC would have the right to decide about the tournament's location."
Morgan said cancellation had not been an option and the board had decided against relocating the tournament to Sri Lanka.
"It was considered but dismissed very rapidly quite simply because there was no longer sufficient lead time to relocate the event in the same time frame," he said.
"Three countries had indicated to me privately ahead of South Africa's decision that they would not be able to send a squad for reasons of safety and security.
"In fact of the eight participating teams five of the teams had indicated that they would not be able to send a team to Pakistan in the current circumstances."
The PCB had resisted the possibility of switching the tournament to Sri Lanka, having successfully staged the six-nation Asia Cup in June and July, as it would have lost them a lot of money.
"It was either relocating to Sri Lanka or the second option was to keep the right to host the tournament by agreeing to its postponement," said PCB chief operating officer Shafqat Naghmi.
"The first option was not acceptable to us, so ultimately it was decided that the tournament be rescheduled."
"We are naturally disappointed but in a way the postponement is a victory for us. We are sure the event will be held in Pakistan next year."
As for the impact of the postponement on Pakistan, Naghmi said: "Cricket is not going to die here. I am sure of that. We are passing through a difficult phase but it is not going to last forever."
The Champions Trophy postponement is not the first time that international cricket in Pakistan has been disrupted because of security issues.
New Zealand cut short a tour in May 2002 after a bomb blast outside their hotel in Karachi killed 19 people, including 14 French naval staff.
Australia won the Champions Trophy when it was played in India in 2006
And the PCB had to relocate two home series to Sri Lanka and Sharjah later that year after the West Indies and Australia refused to tour.
The ICC always maintained, however, that the Champions Trophy would not be moved, although a decision was taken to remove Rawalpindi from the itinerary - the scene of last December's assassination of Benazir Bhutto - and stage matches only in Lahore and Karachi.
Pakistan appointed a special task force to oversee security during the event, but that did not satisfy Cricket South Africa, who announced the withdrawal of its team on Friday.
Giles Clarke, Morgan's successor as chairman of the England and Wales Cricket Board, welcomed the decision to postpone the tournament.
"The ECB Board made it clear to ICC chief executive Haroon Lorgat at a meeting at Lord's last week that ECB had a duty of care for England players and officials as well as a desire to ensure the interests of the media and spectators were not compromised," he said.
"The ECB explained their reservations and security concerns about staging the tournament in the aftermath of the resignation of the Pakistan President Pervez Musharraf last Monday. These concerns were shared by four other competing countries."
Clarke praised the "outstanding efforts" of the PCB to try and eliminate any risk to the competing teams.
And he added: "I will be meeting with the incoming chairman of the PCB, once an appointment is made, to discuss ways that our two boards can work together in the future."
The ICC board will meet in Dubai on 11-12 September to discuss a new date for the Champions Trophy.
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