The singer, whose band The Smiths released an album called Meat Is Murder, is an avid campaigner for animal rights.
A statement on the fan site True To You, which he uses to post official messages, said the show at the Harpa concert in Reykjavik hall had been scrapped "due to the refusal of management" to "sell only vegetarian food on the night".
He said: "I love Iceland and I have waited a long time to return, but I shall leave the Harpa concert hall to their cannibalistic flesh-eating bloodlust."
It is not the first time a gig has been cancelled after it conflicted with his vegetarian beliefs - in 2009 he left the stage at California's Coachella Festival after complaining about the smell of burgers, telling the crowd he could smell "burning flesh".
Morrissey is due to play a number of dates in the UK in March.