The deal with the United Nations would have relocated thousands to Western countries, while allowing about half to stay in Israel.
Rwandan officials have repeatedly denied an agreement to accept forcibly deported migrants from Israel.
Israel's government is in turmoil after a major policy for dealing with African migrants collapsed within a few hours.
The Prime Minister's Office said in a statement Monday that the original mass deportation plan was canceled "because of legal considerations and political difficulties on behalf of third-party countries".
The agreement with the UN Refugee Agency (UNHCR), which was announced by Netanyahu himself yesterday evening, included the detention of forced deportations of African asylum seekers, mainly from Eritrea and Sudan. Critics called the deportation plan unethical and a stain on Israel's image as a refuge for Jewish migrants.
It is not known what will happen now to the up to 40,000 African asylum seekers in Israel; an Israeli government plan to deport them this month was put on hold following the announcement of the United Nations deal.
In return, Israel would grant temporary residency to one migrant for each one resettled elsewhere.
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Israel had been scheduled to begin deporting the migrants next week under a plan and budget approved by the country's Cabinet in January. The area of southern Tel Aviv, where many reside, is "economically challenged" with "unemployment and social tension", UNHCR spokesperson William Spindler told HuffPost on Monday.
The facility was closed last month as part of the previous plan.
"We continue to believe in the need for an accord advantageous for all that can benefit Israel, the worldwide community and the people who need asylum, and we hope that Israel reconsiders its decision", said a UNHCR spokesperson.
In any case, she added, a decision will be taken "when we have all the elements" necessary "and we remain available because this is the solution that would in the end be beneficial for both sides, the State of Israel and the refugees".
In the past two years I have been working with Rwanda so that it will serve as a third country' that absorbs infiltrators who will be deported without their consent.
Nationalist allies who dominate Netanyahu's coalition had harshly criticized the deal because it would allow thousands of Africans to remain in Israel. Otherwise, he warned "the government of Israel won't be able to convince anyone in the future that infiltrating isn't worthwhile".
"Despite legal restraints and global difficulties that are piling up, we will continue to act with determination to explore all of the options at our disposal to remove the infiltrators", Netanyahu said in his statement on Tuesday.