The vaccine, developed by the University of Queensland and Australian biotech CSL, has been in first-stage clinical tests but scientists said the false HIV positives preclude any further development.
None of the volunteers who tested positive actually have the human immunodeficiency viruses that cause AIDS, researchers said.
"Follow up tests confirmed that there is no HIV virus present, just a false positive on certain HIV tests. There is no possibility the vaccine causes infection," CSL said in a statement.
"Therefore, CSL and the Australian government have agreed vaccine development will not proceed to Phase 2/3 trials."
CSL said data from the trials, which included more than 200 volunteers, show that antibodies produced by the vaccine had apparently interfered with some of the tests and led to the false positives.
Researchers will continue to analyze data from the trials to see how long the antibodies persist. The University of Queensland will submit the data for peer-review.
Prime Minister Scott Morrison said Australia will increase production and purchases for AstraZeneca's pending vaccine by 20 million doses and hike access to Novavax's vaccine by 11 million doses.
"The AstraZeneca vaccine, of course, is manufactured here in Melbourne by CSL," Morrison noted.
Scientists had hoped the CSL vaccine would be available by the middle of 2021. Researchers said the human clinical volunteers didn't show any serious side effects from the now-halted vaccine.