The announcement comes after the Biden administration approved the potential sale of air defence radars and aircrafts to Cairo for a combined value of more than $2.5 billion.
The Biden administration has said it is cancelling $130 million in military aid to Egypt over human rights concerns.
Egypt had not met the conditions to receive the $130 million in foreign military financing that has been on hold since September, the State Department said on Friday.
“The deadline for meeting those conditions will soon pass,” the department said.
“The (government of Egypt) made notable progress on the conditions but to date has not met them all. Therefore, after January 30, the secretary intends to reprogram the $130 million to other national security priorities.”
The State Department said the money would be shifted to other programmes, but did not elaborate.
The announcement comes just days after the administration approved a massive $2.5 billion arms sale to the country.
Secretary of State Antony Blinken in September approved the release of $300 million in foreign military financing to Egypt but withheld another $130 million.
Their condition was for the government to address “specific human-rights related conditions” by the end of January.
In announcing the cancellation, the department made no mention of the $2.5 billion sale of military transport planes and radar systems that it had approved on Tuesday without any mention of the frozen $130 million.
Asked about the apparent inconsistency, US officials have said the military aid and the arms sale are unrelated.
They say Egypt will shoulder the cost of the $2.2 billion purchase of the 12 Super Hercules C-130 transport aircraft and air defence radar systems worth an estimated $355 million.
Egypt’s government has in recent years waged a wide-scale crackdown on dissent, jailing thousands of people, mainly opposition activists, who were involved in the 2011 Arab Spring uprising.
Egypt imposed a state of emergency in April 2017, following deadly church bombings and attacks on Coptic Christians that killed more than 100 people and wounded scores. It allowed for arrests without warrants, swift prosecution of suspects and the establishment of special courts.
The state of emergency has since been extended several times. However, President Abdel Fattah el Sisi announced in October, when the last extension expired, that his government will no longer renew it.