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But the University of Otago says its collaboration with other organisations to bolster rural healthcare remains on the table.
"From my point of view we have a very strong, ongoing commitment to that, no doubt about that," professor of public health and former University of Otago health sciences pro-vice-chancellor Peter Crampton said last night.
The National Government, before last year's election, promised to create the school in a bid to attract more doctors to the regions.
That followed a bid by Waikato for a third medical school.
Otago responded with a national collaboration with the University of Auckland, Auckland University of Technology, the Royal New Zealand College of General Practitioners and others, and a plan to build academic careers for rural practitioners in rural communities.
Health Minister David Clark yesterday announced he had scrapped plans for a new school.
"By itself, just training more undergraduate doctors is not the answer.
"We need a more comprehensive approach to attract, support and sustain the health professionals that care for rural people."
Dr Clark said he had asked the Ministry of Health to work on addressing issues of access to health services and availability of practitioners in rural areas.
Prof Crampton said Dr Clark's thoughts on the issue were "largely very positive".
"It's an acknowledgement of the issues facing rural communities, and the complexity of the rural health workforce, recruitment and retention."
The Government had decided not to try to fix the problem by "setting up another medical school and pumping out more doctors".
Instead it was "engaging with the complexity of rural health in rural communities", with an acknowledgement that was about more than doctors.
Dr Clark said the Government would change the training funding mix so more GP training places went to rural trainees, and invest in professional development for rural primary health care nurses and midwives.
It would extend rural inter-professional education programmes, and improve the use of technology for professional rural support.
Prof Crampton described those as "all very, very positive statements".
"I really love it that there is an explicit recognition there of the diversity of the workforce itself, the midwives, the nurses and other components.
"All of those components are necessary for rural communities."
Dr Clark said the Ministry of Health would urgently consider longer-term solutions for the issue, and Prof Crampton said the collaboration with national organisations to deal with rural health care would not be dropped.
"We will maintain a commitment to that.
"We're in this for the long game."
"We see the announcement today as being a positive contribution to that discussion."