Brussels mayor Yvan Mayeur said the decision was made following a risk analysis by security experts.
He told broadcaster RTBF: "Unfortunately we have been forced to cancel the fireworks and all that was planned for tomorrow (Thursday) evening and that would have brought a lot of people together in the centre of Brussels."
Around 50,000 people were expected to attend the annual fireworks display in Place de Brouckere. The only event that will continue is the Christmas markets.
It comes after two men were held on suspicion of plotting militant attacks in the city on New Year's Eve.
They were arrested during an anti-terrorist operation across Brussels and the neighbouring Brabant region as well as in the Liege area on Sunday and Monday.
Six people were initially questioned after house searches but four of them were released.
Police found military clothing and Islamic State propaganda and computer material which investigators are examining, but no weapons or explosives.
The two arrested men belong to the Kamikaze Riders, a motorbike club whose members are mostly of North African origin.
Brussels last called off its New Year fireworks display in 2007 after a plan was foiled to free Nizar Trabelsi, a former Tunisian footballer convicted of plotting to blow up a military base.
Last month schools, universities and the Metro were shut down in Brussels for several days after authorities raised the alert over a "serious and imminent" terror threat.
Belgium, and Brussels in particular, have been at the centre of investigations into the Paris attacks after it emerged that two of the suicide bombers who attacked the French capital had lived in the country.
Belgian authorities have arrested a number of people on suspicion of involvement in those attacks, which have been claimed by Islamic State.
Two of the Paris suicide bombers, Brahim Abdeslam and Bilal Hadfi, had been living in Belgium.
Brahim's brother, Salah Abdeslam, a key suspect in the attacks on 13 November, had fled to Belgium afterwards and remains on the run.
The car he was in was said to have been stopped three times by French police unaware that one of the passengers was Europe's most wanted fugitive.
Belgian national Abdelhamid Abaaoud was suspected of being the ringleader of the Paris attacks. He was later killed during a siege at a flat in a Paris suburb.
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