Argentine striker Gonzalo Higuain told the ESPN sports channel on Tuesday the game had been cancelled, BBC reported.
"They've finally done the right thing," Higuain said in an interview.
Argentine media also reported the cancellation. There was no official statement from the Israeli football association.
Media reports said Israeli Prime Minister Benjamin Netanyahu had called Argentine President Mauricio Macri in an attempt to salvage the friendly tie, due to be played in Jerusalem on Saturday.
The news was met with cheers in Gaza, where at least 120 Palestinians were killed by Israeli forces during recent protests.
In Ramallah in the West Bank, the Palestinian football association issued a statement thanking Argentine striker Lionel Messi and his colleagues for the cancellation.
"Values, morals and sport have secured a victory today and a red card was raised at Israel through the cancellation of the game," said chairman Jibril Rajoub.
The match, which was to be Argentina's final game before the start of their World Cup campaign in Russia later this month, was set to be played at a stadium in West Jerusalem.
The status of Jerusalem is highly sensitive. Israel regards Jerusalem as its "eternal and undivided" capital. Palestinians see the eastern part of the city as the capital of a future Palestinian state, and were angered by a decision to relocate the game there from Haifa.
Last month, US President Donald Trump stirred international anger and condemnation with a decision to relocate the US embassy to Jerusalem, recognising the city as the capital of Israel.
(This story has not been edited by Social News XYZ staff and is auto-generated from a syndicated feed.)
