Allen's Unlawful Killing, which questioned the circumstances surrounding Diana's death, was unofficially screened at Cannes last year.
A spokesperson for the film told The Sun: "Unlawful Killing has been sold all around the world.
"But there was a specific form of insurance needed by the US distributors to cover them for their French and UK offices. This proved impossible to secure. The film has been withdrawn in perpetuity."
Director Allen had originally suggested that Unlawful Killing would be screened in London, while conceding that a UK release would always be doubtful.
The 59-year-old refused to censor the film, which contained a dying photo of the former Princess of Wales.
The project had the financial backing of Mohamed Al-Fayed, the father of Diana's partner Dodi Fayed.
> Read an interview with Keith Allen about 'Unlawful Killing' here
Watch the Unlawful Killing trailer below: