The plant, which would have been operational for 30 years, would have manufactured blades, as well as assembled nacelles, for the V164 7MW turbine.
In a statement, Juan Araluce, chief sales officer at Vestas Wind Systems said: "Vestas’ strong commitment to the development of both the offshore and onshore wind industries is not affected by this decision.
"We will remain active across the two markets in the UK as they both continue to show considerable potential."
Earlier this year, it had looked like Vestas was progressing its plan for Sheerness. In May, it received planning permission from Swale council to go ahead with the plant.
However, there were warning signs about Vestas' backing for Sheerness in May, when it announced it was putting the development of the V164 7MW turbine back by a year.
There have been signs, Vestas and other turbine manufacturers are losing patience with the UK. Speaking to Windpower Monthly at the Global Offshore conference in London, Vestas director for UK government relations director Matthew Delany said the company was monitoring developer uncertainty caused by UK government policy.
Speaking to Windpower Monthly at the same event, senior figures from Alstom and Areva, who are both looking at building offshore plants in the UK, said policy and financial uncertainty were potential obstacles to investment.
Speaking about Vestas' decision, Maria McCaffery, CEO of RenewableUK said: "Naturally we are disappointed with this decision, but as the world-leader in offshore wind, the UK remains an attractive place for manufacturers and members of the supply chain to have a base.
"This is why we’re seeing interest from a number of parties – just last week Areva announced their interest in a UK factory, subject to market certainty around Electricity Market Reform. Investors in both projects and employment are poised to follow through on pledges but delivery on green jobs needs certainty and confidence in the market with clarity on implementation arrangements and timescales."
Last year, when the Sheerness project was announced, Vestas CEO Ditlev Engel made it clear government policy would have to be in place before the Sheerness plant went ahead.
Speaking to Windpower Monthly in January, Vestas CEO Ditlev Engel said: "Sheernees is a huge investment and it will not make sense if we don't gave the orders to back it up. We need to have the orders so when we invest the money we have the orders to back it up. There's still some time to go but we are in dialogue with customers."In May, the then Vestas Offshore president Ander Soe-Jensen called for "long-term political and regulatory certainty to ensure their business case".
He continued: "Making that happen lies in the hands of the policy makers, so we are looking forward to the UK government providing the best possible terms for the offshore wind industry to truly take off and the potential jobs becoming a reality."