The summer sports event, which was set to begin in Tokyo on 24 July, will now take place "no later than summer 2021".
Japanese prime minister Shinzo Abe and Thomas Bach, president of the International Olympic Committee (IOC), made the decision to protect the health of the athletes and attendees of the event.
"In the present circumstances and based on the information provided by the WHO today, the IOC president and the prime minister of Japan have concluded that the Games of the XXXII Olympiad in Tokyo must be rescheduled," said a statement from the IOC.
It will now take place on "a date beyond 2020 but not later than summer 2021, to safeguard the health of the athletes, everybody involved in the Olympic Games and the international community."
Olympics to take place in Kengo Kuma stadium
Numerous architects and designers have created buildings, branding and products for the 2020 Olympics.
The event's centrepiece will be the Kengo Kuma-designed Olympic Stadium. The latticed timber structure by the Japanese architect was chosen in 2015 after late British-Iraqi architect Zaha Hadid's design was rejected.
A stadium from the Tokyo 1964 Olympic Games is also being renovated for the games.
Olympics could be " light at the end of the tunnel"
The rearranged event will keep the name Tokyo 2020 despite the fact it may now take place in 2021.
The Olympic organisers hope that the rearranged event will be "a beacon of hope" during the coronavirus outbreak.
"The leaders agreed that the Olympic Games in Tokyo could stand as a beacon of hope to the world during these troubled times and that the Olympic flame could become the light at the end of the tunnel in which the world finds itself at present," continued the statement.
"Therefore, it was agreed that the Olympic flame will stay in Japan. It was also agreed that the Games will keep the name Olympic and Paralympic Games Tokyo 2020."
The event is the latest major event to be postponed or cancelled due to the coronavirus outbreak, which has now infected more than 300,000 people worldwide.
Architecture and design events around the world have been impacted including, Milan's Salone del Mobile and the Venice Architecture Biennale, which have both been postponed. Visit Dezeen Events Guide's for an up-to-date list of affected events.