The cancellation came after the European Union put pressure on host Turkey to either stop al-Bashir from attending the economic summit or arrest him upon arrival.
Sudan's leader is wanted by the International Criminal Court (ICC) for trial on charges of war crimes and crimes against humanity in the western region of Darfur.
The first sitting head of state to be indicted by the ICC, al-Bashir has rejected the court's legitimacy and defied the arrest warrant, saying that The Hague-based court is merely a tool of Western powers after Sudan's oil.
Arab League leaders meeting Qatar earlier this year also dismissed the ICC arrest warrant and emphasised their "solidarity" with al-Bashir, saying that any efforts to address the situation in Darfur would need an agreement between all Sudanese factions, rather than the trial of the president.
Charges questioned
Turkey, which has long sought to join the EU, has pointed out it is not a signatory to the treaty which set up the ICC, and that al-Bashir was invited to the meeting by the OIC and not Ankara.
Recep Tayyip Erdogan, the Turkish prime minister, questioned the charges against al-Bashir and said that "no Muslim could perpetrate a genocide", according to Turkey's Anatolia news agency.
"If there was such a thing [genocide], we could talk about it face to face with President Bashir."
The United Nations says up to 300,000 people have died and 2.7 million forced from their homes since ethnic minority rebels in Darfur first rose up against the Arab-dominated government in Khartoum in February 2003.
The Sudanese government disputes the death toll, saying around 10,000 people have died.
The OIC summit, set to address issues of trade and poverty, is expected to draw other leaders from Muslim-majority countries, including Mahmoud Ahmadinejad, the Iranian president, Bashir al-Assad, the Syrian president, Salam Fayyad, the Palestinian prime minister, and the newly re-elected Afghan president Hamid Karzai.