In a statement, the companies said the decision had been taken on the back of recent "changes in strategies" by the two companies. The economic downturn was also blamed. The deal was signed in June 2008.
Despite cancelling the agreement, Iberdrola and Gamesa said they would continue working together.
Earlier this year, Gamesa signed a memorandum of understanding to sell 900MW worth of wind turbines to utilities Longyuan, China Resources Power (CRP) and Datang.