The 'Girl Gone Wild' singer donated $15m (£9.4m) to build the school, attending a special groundbreaking ceremony in 2009.
However plans for the school were cancelled last year, and The Guardian now reports that a monument to national heroes will be built in its place.
The new project, the result of a cabinet decision, will apparently cost the Southern African nation millions.
Tourism Minister Daniel Liwimbi has said: "Malawians deemed to have done a heroic endeavour of national importance, and selected by [a] committee which will scrutinise whatever they did, will be buried there."
Madonna has adopted son David and daughter Mercy from Malawi.
She is also mother to 15-year-old Lourdes from her relationship with Carlos Leon and 11-year-old Rocco from her marriage to Guy Richie.
Watch Madonna's music video for 'Turn Up the Radio' below: