Organisers of the festival, which dates back to 1984, say they have been unable to plan a programme and sell tickets in advance as normal due to the ongoing curbs on travel, social gatherings and events.
They believe there is no prospect of the festival, one of the biggest events in the calendar of whisky fans, being able to stage its normal line-up of ceilidh dances, concerts, tastings and tours, which are usually staged at distilleries across the island.
They say they have also taken into account that visitors to the island for the event, which is also known as Fèis Ìle, usually book their travel and accommodation months in advance.
Fèis Ìle, which was initially staged to revive the island’s traditional Gaelic culture, has grown to become the major showcase for Islay’s food and drink operators.
Organised by a committee of volunteers and the island’s distilleries, the Fèis has recorded attendances of 9000 in recent years, three times its population.
An announcement from the week-long festival stated: "With deep regret we announce that this year’s festival is cancelled.
"We have discussed this with our distillery partners, and we have come to this decision together.
"We know you love the Fèis and know many of you have questions, so we’d like to explain why we’ve made this decision now.
“People make the Fèis and people make Islay what it is - keeping everyone safe is our top priority. Even if travel to Islay is allowed, the ceilidhs, tastings and large events that make the Fèis what it is, will not be able to take place.
"By now the committee would usually have arranged and sold out all of our events, and the distilleries would have everything in place.
"With the current situation, we can’t plan ahead as we don’t know what the government guidelines might be. We also need to allow for the fact that people need to be able to make their plans to travel and stay.
Last year's festival was called off in mid-March within days of the Scottish Government announcing an indefinite ban on events for more than 500 people.
Today’s statement from the organisers said they had ruled out trying to postpone this year’s event and would instead by staging a virtual version of the festival this year.
They added: "We know you won’t like hearing this news. We don’t like saying it. But please just keep Islay in your hearts for a little longer: hold on to the love of the island, the music, the whisky and the company, and the embraces when we see you again will be all the sweeter.”David Adams McGilp, regional cirector at VisitScotland, said: “We’re saddened to hear that Fèis Ìle has been cancelled this year, which is understandable given the ongoing pandemic, current impact on gatherings and travel, and uncertainty surrounding restrictions in the near-future.
"The festival is always hugely popular with UK and international visitors and provides an important boost to the local economy. We are, however, encouraged that the festival will be kept alive in some virtual form this year.”