The Championship club, who were relegated from the Premier League in May, had pencilled in a friendly against Qatar during a pre-season training camp in Austria next week.
However, news of the match was greeted with anger by fan groups the Proud Hornets and Women of Watford FC.
The groups said they were "disappointed" by the decision due to Qatar's condemned views on homosexuality, human rights and women's rights.
Qatar has also been criticised over its treatment of migrant workers building stadiums for the 2022 World Cup.
In a statement released on Monday, Watford confirmed the friendly against Qatar will no longer be going ahead.
"The game was never finalised and it became abundantly clear this was a game not to play; as such, the schedule was revised," a club spokesman said.
A joint statement by Proud Hornets and Women of Watford added: "We are delighted that Watford FC has listened to our concerns and cancelled the game with Qatar.
"We look forward to continuing our discussions with the club on all equality, diversity and inclusion issues."
Qatar will stage the World Cup from November 21 to December 18 this year.
8°C