In light of positions taken by Hezbollah the kingdom proceeded to "a comprehensive review of its relations with the Lebanese republic", an unnamed official told the Saudi Press Agency.
It added that the remainder of a $1 billion financing package for Lebanese internal security forces had also been stopped, in a separate decision.
A Lebanese military source told AFP that the "Lebanese army command hasn't been informed" of the Saudi aid halt.
Hezbollah, however, said the Saudi decision came as no surprise and "was taken quite some time ago".
The $3 billion deal funded military equipment provided by France. The modernisation programme, known in France as Donas, aimed to ensure stability in a Lebanon weakened by internal divisions and threatened by jihadists.
Alleged leaders of Lebanon-based Hezbollah are under sanction by Saudi Arabia.
Hezbollah is supported by the kingdom's regional rival Iran, with whom relations have worsened this year.
Riyadh cut diplomatic ties with Tehran last month after demonstrators stormed its embassy and a consulate following the Saudi execution of a prominent Saudi Shiite cleric and activist.
The official quoted by the Saudi Press Agency said the kingdom had noticed "hostile Lebanese positions resulting from the stranglehold of Hezbollah on the State".
Syria's war has exacerbated political rivalries within Lebanon, which has been without a president for almost two years because of fierce disagreements between Hezbollah and its rivals.
The Saudi official said Lebanon had not joined condemnation of the attacks on its diplomatic missions in Iran, either at the Arab League or the Organisation of Islamic Cooperation.
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He also deplored the "political and media campaigns inspired by Hezbollah against Saudi Arabia", as well as the group's "terrorist acts against Arab and Muslim nations".
Hezbollah chief Hassan Nasrallah on Tuesday accused Turkey and Saudi Arabia of dragging the entire region into war and said "victory" was imminent for his group and its Syrian regime allies.
Nasrallah said the two countries have pushed to send international ground forces to Syria because they "are not ready to accept a political solution to the conflict in Syria, which is why they want to continue the war and destroy it".
Saudi Arabia supports rebels opposed to Syria's government.
In a statement, Hezbollah said Saudi Arabia took the decision because of economic pressures from the war in Yemen, where it leads an Arab military coalition fighting Iran-backed rebels, and lower oil revenues.
"The entire world and especially the Lebanese and the local and international financial institutions know full well that Saudi Arabia is suffering a severe financial crisis," Hezbollah said.
Lebanon's other main political bloc is led by Sunni former prime minister Saad Hariri, who is supported by Saudi Arabia and the West.
Hariri said Lebanese "received with feelings of regret and worry" the Saudi decision, but it was understandable as a response "to Lebanon's rash decisions to exit from the Arab consensus".
The United Arab Emirates supported the Saudi move, which resulted from repeated Lebanese violations of Arab solidarity in a "blatant, offensive, disturbing and surprising" manner after Hezbollah "hijacked" Lebanon's agenda, the official WAM news agency reported, citing the foreign ministry.
The Donas programme was to ship vehicles, helicopters, drones, cannons and other equipment to Lebanon.
After an initial delivery of 48 Milan anti-tank missiles in April the programme was delayed as Saudi authorities sought a review of certain aspects of the deal, a French source said earlier.
But France's Defence Minister Jean-Yves Le Drian later said "the execution of Donas resumed normally at the end of 2015", as reflected in the signing of contracts with the companies concerned.
This included a deal for about 200 armoured vehicles.