The council said it will now “step back” from constructing a southern leg of Melton Mowbray Distributor Road after costs rose from £43m to £70m.
The north and east section of the route are currently under construction despite costs doubling from an initial £62m to £127m.
Galliford Try is main contractor on the north and east section.
Nick Rushton, Leader of Leicestershire County Council said: “We’ve bent over backwards trying to identify alternative funding methods and lobbied Government for more money to help us get the southern leg over the line. We’ve simply exhausted all avenues and cannot afford to build it at this point in time, given our cost pressures and inflation.
“Construction of the north and eastern leg is well underway and one of the biggest road schemes we’ve ever built. Given the amount of work put in on the southern stretch to date, we would be in a good position to bid for money to support this project at a later date.”
Government agency Homes England had offered the council an £18.2m Housing Infrastructure Fund grant which was conditional on the southern stretch being fully funded.
Work to build the northern and eastern leg got underway earlier this year. The ground has been levelled and drains and fencing put in for the new 7.1km road which is on track to open in late 2025.
