Deputy Prime Minister Nick Clegg said he will order his Liberal Democrat MPs to oppose changes to the political map in retaliation to Tory resistance to House of Lords reform.
Re-drawing constituency boundaries to slash the number of MPs from 650 to 600 would have given birth to a "Devonwall" seat straddling the historic divide between the two counties.
But without Lib Dem support, and with Labour also opposed, the Tory-driven legislation is highly unlikely to get through Parliament.
Rather than inflict a Government defeat, Mr Clegg has suggested deferring a vote on the boundary changes until after the 2015 election.
The Keep Cornwall Whole campaign group said a Devonwall seat was "unlikely". It added: "Keep Cornwall Whole supports the Lib Dem decision to oppose boundary change. We urge Government to now drop proposals entirely."
The announcement came after the Conservatives had "broken the contract" between the coalition partners by opposing reform of the House of Lords championed by the Lib Dems, Mr Clegg claimed.
He added he was dropping the Lords Reform Bill after David Cameron informed him that an "insufficient number" of Tory MPs were prepared to support the changes, despite the radical overhaul being in the Coalition Agreement.
He insisted that the Lib Dems would carry on in the coalition, despite the failure of the Tories to deliver on their promises.
The Lib Dems, by contrast, were hammered for supporting a three-fold rise in university tuition fees, despite pledging to abolish the charge.
"The Conservative party is not honouring the commitment to Lords reform and, as a result, part of our contract has now been broken," he told journalists in London.
"Clearly I cannot permit a situation where Conservative rebels can pick and choose the parts of the contract they like, while Liberal Democrat MPs are bound to the entire agreement."
He went on: "So I have told the Prime Minister that when, in due course, parliament votes on boundary changes for the 2015 election I will be instructing my party to oppose them."
While not all Conservative MPs were comfortable with the boundary review – especially those set to lose their seats – the move would have helped the party secure an overall majority at the next election.
To accommodate Devon and Cornwall losing one MP between them, the Boundary Commission proposed a seat including Bude in North Cornwall and Bideford in West Devon.
Scores took part in an anti-Devonwall demonstration on the Cornwall banks of the Tamar, and Prime Minister David Cameron was criticised for a flippant attitude towards the Cornish identity when he quipped on television: "It's the Tamar, not the Amazon, for Heaven's sake."
Of the 18 MPs that represent Devon and Cornwall in Parliament, only four escaped with no changes to their patch.
Gary Streeter, Conservative MP for South West Devon, said the Lib Dem leadership's move was "not brimming over with integrity".
"But it does not mean the coalition is dead," he added.
"It is disingenuous of his party to link House of Lords reform to boundary changes. A referendum on the AV electoral system last year was the exchange for boundary changes. But until David Cameron agrees with it, it does remain up in the air."
Councillor Alex Folkes, Lib Dem chairman of Cornwall Council's electoral panel, also warned the Devonwall proposal could return.
He said: "I'm delighted that Nick Clegg and the Liberal Democrats have committed to blocking the Devonwall seat by voting against the boundary changes. It has always been a ludicrous idea to combine Cornwall and Devon into a single seat and thus throw out hundreds of years of history and culture and split communities down the middle.
"But I'm disappointed that this relief might only be temporary and I'm personally sad that this change is not happening on a matter of principle but in a revenge attack by Nick Clegg on the Conservatives for their failure to back the coalition agreement on Lords reform."
The legislation now dropped would have created a mostly-elected second chamber, with 360 of a total of 450 new members voted for by the public. The greater South West would have got 33 new elected politicians serving a single 15-year term. Mr Clegg disclosed that he offered a "last ditch" compromise to try to save both parts of the reform programme.
Under his proposal, there would have been a referendum on Lords reform on general election day in 2015, with both the boundary changes and the first elections to the Lords deferred until 2020. "That would have been in keeping with the coalition agreement, in which neither policy had a set timetable. But this offer was not accepted," he said.
The Deputy Prime Minister also bitterly attacked Labour for threatening to combine with Tory rebels to defeat Lords reform. For the Conservatives, Culture Secretary Jeremy Hunt described Mr Clegg's decision as "disappointing" but said that it would not affect the two parties' commitment to work together.
