Casa Atlântica, an 11-storey apartment building with a facade reminiscent a sea creature's spiny vertebrae, would have been the first building in Brazil from the late Pritzker Prize-winning architect.
But delays from the city hall to grant licenses for the project have caused it to stall, reported local paper O Globo.
Brazilian entrepreneur Omar Peres commissioned Zaha Hadid Architects to design the building in 2013, reportedly giving her free rein over the design. It was originally due to finish in time for the Rio 2016 Olympics.
Construction was delayed for years, but had been scheduled to finally start this year. However the investment group has now dropped out and the land is being put up for auction.
The curving, organic lines of the Casa Atlântica facade would have been a classic Hadid design. Originally planned as a luxury hotel, before being switched to a 30-unit residential tower, the tower was designed to fit in the context of Brazil's modernist architecture.
Set on the Avenida Atlântica, it would have harmonised with the wave-patterned pavement that runs for two and a half miles along the beachfront road, designed by world-renowned Brazilian landscape artist Roberto Burle Marx.
Patrick Schumacher, who was also credited for the building's design, took over as director of Zaha Hadid Architects when its founder passed away unexpectedly in 2016.
The practice now has no other current projects planned in South America. But further north, it is working on plans for Mexico City's tallest residential tower.
Rare photos emerged earlier this year of the only private residential project designed by the late Iraqi-British architect ever completed, in a forest near Moscow, as well as shots of the apartment Hadid designed for herself in Miami Beach.
Zaha Hadid Architects did not respond to Dezeen's request for comment on Casa Atlântica.