Mondelez, which re-branded from Kraft Foods in 2012, revealed it had dropped the plans in a statement tonight.
The decision comes after the Mondelez had a $23bn (£17.6bn) takeover offer for Hershey rejected in June.
“Following additional discussions, and taking into account recent shareholder developments at Hershey, we determined that there is no actionable path forward toward an agreement,” Mondelez chief executive Irene Rosenfeld said.
“While we are disappointed in this outcome, we remain disciplined in our approach to creating value, including through acquisitions, and confident that our advantaged platform positions us well for top-tier performance over the long term."
In after-hours trading, the revelation has seen Hershey's shares respond by tumbling 11 per cent to $98.93, while Mondelez's shares climbed slightly, up 3.6 per cent to $44.60.