The five-day event in Gloucestershire was due to start on Thursday (3 May) and was expected to attract some 100,000 spectators.
The Duke and Duchess of Cambridge were set to make an appearance on Monday (7 May) as part of their one-year wedding anniversary celebrations.
A statement on the event’s website reads:
"The recent exceptional rainfall has left the ground at Badminton totally waterlogged and partially flooded. Further rain is due this week leaving no chance of the ground drying out. Very sadly therefore the 2012 Mitsubishi Motors Badminton Horse Trials has been cancelled.
"Purchasers of advance tickets, exhibitors, sponsors and riders will of course be refunded as soon as is practical."
The decision is expected to cost thousands of pounds in lost revenue.
With over 170 active flood alerts and more heavy rainfall forecast across the UK, contingency underwriter Beazley said it is being "deluged" with inquires for event cancellation insurance.
"With the Jubilee weekend only a few weeks away, and the summer months traditionally the time when fetes and festivals are held, event organisers are suddenly realising that their event might be in danger of cancellation due the weather," said Christian Phillips, contingency underwriter at the Beazley Group.
"The current flooding and rain is likely to lead to a number of events having to be cancelled, abandoned or them suffering a significant drop in attendance figures."
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