She had been expected to join the board after News Corp acquired Shine Group, the TV production company she runs, in a deal worth £415 million.
But the embattled News Corporation said in a statement on Saturday that Elisabeth Murdoch had recently informed the board that it would be "inappropriate" for her to make the move.
Viet Dinh, chairman of the nominating and corporate governance committee of the News Corporation board of directors, said: "Elisabeth Murdoch suggested to the independent directors some weeks ago that she felt it would be inappropriate to include her nomination to the board of News Corp at this year's AGM, as had been announced by chairman and chief executive Rupert Murdoch at the time of the acquisition of Shine Group earlier this year.
"The independent directors agreed that the previously planned nomination should be delayed.
"Both Elisabeth and the board hope this decision reaffirms that News Corp aspires to the highest standards of corporate governance and will continue to act in the best interests of all stakeholders, be they shareholders, employees or the billions of consumers whom News Corp content informs, entertains and sometimes provokes every year."
Elisabeth Murdoch founded Shine ten years ago and built the company into a successful force in UK TV production, making hit shows such as Ashes to Ashes, MasterChef, Merlin and Spooks.
However, shareholders in News Corp have alleged that News Corp's board of directors failed to properly challenge Rupert Murdoch's actions in the deal, amid claims that it was a case of "nepotism".
The shareholders, led by the Amalgamated Bank of New York and the Central Laborers Pension Fund, also accused Rupert Murdoch of treating his media empire like a "family candy jar".
The Murdoch family controls nearly 40% of News Corp's voting shares through a family trust, and Murdoch's sons James and Lachlan already sit on the board.
In an amended lawsuit filed in the US last month, the shareholders also hit out at "egregious" behaviour by News Corp and failed corporate governance in the phone hacking scandal.