Transport for London announced the plan will not go ahead, due to a “significant funding gap” and the reasoning being “poor”.
In February, a tram line between Sutton and Colliers Wood was the preferred option, following a three-month consultation.
This announcement follows a £1.6bn funding package from the government.
Lib Dem Councillor Jayne McCoy says “the tram would have unlocked access to jobs, housing and attracted new business and investment into the borough”.
They’re calling for more money for the capital, and the ability to retain more the city’s taxes.