In light of the "extreme uncertainly on the financial markets and to preserve a fair price" the DB Mobility Logistics unit would not proceed with the listing, the Finance Ministry said in a statement.
But German Finance Minister Peer Steinbrück said the government stood behind the decision to float part of the company on the stock market.
“As soon as the market conditions are conducive to a successful stock market listing we will be ready to go ahead,” he said.
The listing of a 24.9-percent stake in the railway operator was planned for October 27, but the government stood to rake in far less money with global stock markets are reeling from the financial crisis.
The German government had hoped to net between €5 and €8 billion ($7 and $12 billion) for the initial public offering, however, many analysts had begun predicting the IPO would be lucky to take in barely more than €4 billion, given the current global financial crisis.
Government sources told the DPA news agency earlier on Thursday it would be “at least a few weeks” before Deutsche Bahn would attempt the the partial privatization.
But Deutsche Bahn officials announced they would in the meantime continue searching for potential investors.