Joint venture partners Galliford Try and SIAC stopped work last year when they had a disagreement with Belfast City Council about how the contract was being delivered.
Belfast City Council has now written to the two contractors and a council spokesman confirmed to the BBC that the contract has been terminated because of a failure to provide an agreed design and progress the contract.
Problems first surfaced on the job last September and an agenda from a meeting between the council and the contractors states there was a lack of mutual trust.
The Connswater scheme, which was aimed at alleviating flooding and developing a green public space, will be retendered in several weeks.
An independent mediator brought in to assess the dispute has recommended the contractors should be offered a final payment of about £250,000.
The scheme plans to create a nine kilometre linear park following the course of the Knock, Connswater and Loop rivers. More than 40 bridges and 19kms of cycle and walkways are to be constructed.
A spokesman for the joint venture contractors declined to comment.